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Troubles in the U.S. commercial real estate market are increasingly affecting German property lenders, with two major banks reporting weaker financial results for 2025. Deutsche Pfandbriefbank (PBB) posted a net loss as it began withdrawing from the U.S. market, while Aareal Bank reported a significant drop in profits due to rising risks in its U.S. loan portfolio. The downturn is largely driven by high office vacancy rates and declining property values, particularly in office buildings as remote work continues to reshape demand. German lenders had previously expanded lending to U.S. commercial properties, making them vulnerable to the sector's slowdown. As a result, banks are now reducing exposure to U.S. office real estate and tightening risk management policies to limit further losses.
The ongoing turmoil in the U.S. commercial real estate (CRE) market is weighing heavily on several German property lenders, with recent financial results revealing the impact of declining property values and rising loan risks. Advertisement
Two major institutions Deutsche Pfandbriefbank (PBB) and Aareal Bank reported weaker performance for 2025, attributing their results largely to problems in the U.S. office property sector. German banks had built significant exposure to American commercial real estate over the past decade, particularly in financing office buildings in major cities.
Deutsche Pfandbriefbank reported a net loss of about 284 million in 2025, reversing a profit recorded the previous year. The lender has begun scaling back its U.S. operations and is retreating from the market as part of a broader strategy to reduce risk.
Aareal Bank also felt the impact of the downturn. The bank reported that its net profit fell by roughly 23% to 137 million, compared with 179 million a year earlier. In addition, it disclosed about $1.1 billion in non-performing loans, most of which are tied to U.S. office properties. The bank has taken additional charges and is planning to accelerate the reduction of its exposure to American office real estate.
The difficulties stem from structural changes in the office market. The widespread adoption of remote and hybrid work has reduced demand for office space, pushing vacancy rates higher and weakening property valuations across many U.S. cities. Falling rents and refinancing challenges have further increased the risk of loan defaults for lenders that financed such properties.
As a result, German banks are adopting more cautious lending strategies. While they intend to remain active in international property financing, several institutions are tightening risk controls and reducing their exposure to U.S. office assets.
The situation highlights the global ripple effects of the commercial real estate slowdown. Weakness in the U.S. office market is now affecting lenders and investors far beyond the country, underscoring the interconnected nature of international real estate finance.
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