German Property Banks Squeezed by US Office Exposure Amid Domestic Stabilization

German Property Banks Squeezed by US Office Exposure Amid Domestic Stabilization

German commercial real estate (CRE) lenders continue to face severe financial strain stemming from their exposure to the troubled United States office property market, forcing major institutions to aggressively scale back or entirely exit their US portfolios¹.

Massive Swings to Net Losses

In March 2026, two of Germany's leading specialized property lenders reported significantly weakened financial results for the full year 2025, driven by high office vacancy rates and falling valuations in major US metropolitan areas.

• Deutsche Pfandbriefbank (pbb): Swung to a massive net loss of €284 million ($329 million) for 2025, compared to a net profit of €90 million in 2024. This loss was primarily driven by the costs associated with its strategic decision to completely withdraw from the US market. The bank had previously warned in February 2026 that it was unlikely to meet its key financial targets for 2027 due to the persistent weakness in the commercial property sector.
• Aareal Bank: Reported a 23% decline in net profit, which dropped to €137 million in 2025 from €179 million in 2024. The private equity-owned lender disclosed that it is sitting on $1.1 billion in non-performing loans (NPLs), which are heavily concentrated in US office properties. Consequently, the bank took an additional €55 million in charges and announced plans to accelerate the reduction of its US office loan book.

Executive Commentary on US Exposure

The management of both institutions highlighted the necessity of retreating from the US market to preserve capital and focus on more stable European property sectors.

As reported by Reuters:

"We will remain active there but want to reduce U.S. office property loans faster than originally planned," said Aareal CEO Christian Ricken.

Aareal Bank's official statement also emphasized a defensive pivot:

"In the face of heightened geopolitical and macroeconomic uncertainty, Aareal Bank will continue to pursue a cautious and prudent risk policy."

This retreat highlights a broader trend among European specialized lenders who misjudged the structural shift in US office demand and are now forced to absorb heavy write-downs to clean up their balance sheets.