Pandion insolvency raises questions about the second wave in the German real estate industry

Dusseldorf. Reinhold Knodel chose pithy words in an interview with Handelsblatt at the end of 2023: “We were surprised at how many of our colleagues faltered or even fell over,” said the boss of the project developer Pandion.

Two and a half years later, the Cologne company was also hit. In mid-August it filed for self-administration bankruptcy for the first companies, followed a few days later by numerous subsidiaries. The developer is currently building large new construction projects in numerous cities and has built one of Cologne's iconic crane houses in the past.

In August, in addition to Pandion, the developer Peters Development from Hamburg was also hit. This means that the focus is once again on the big developers, and the question arises as to whether the industry is facing a second wave of insolvencies. Are the financiers slowly losing patience after the second or third refinancing and demanding a tough step? Or is it individual failings on the part of the company?

Since the outbreak of the Ukrainian war at the beginning of 2022 and the massive rise in interest rates, the real estate market has been in crisis. In recent years it has driven huge companies like the Signa Group into bankruptcy. In the last few months, the wave of bankruptcies seemed to be decreasing, at least among the really big names.

“It is now hitting addresses that one would have expected to get through two years ago,” says Oliver Platt, partner at Kucera Rechtsanwälte. Pandion is an example of this. It is one of the largest German developers and had secured 340 million euros in new financing at the beginning of 2026, but this was project-related and therefore not available at the holding level.

As far as he knows, the application was triggered by the liquidity situation, not by the inefficiency of the projects themselves. The new thing is that it is no longer the individual project that decides, but the question of how long the company as a whole can exist.

Refinancing has become significantly more difficult. Between 2019 and 2022, the commercial real estate industry in Germany took out real estate loans estimated at around 228 billion euros, which must be refinanced now and in the coming years.

According to calculations by the investment manager HIH Invest, the refinancing volume will reach its peak in 2026 and amount to over 40 billion euros. The refinancing gap this year is around 6.3 billion euros. The Handelsblatt had reported several times about the challenges facing the industry.

Francesco Fedele, head of the real estate service provider BF Direkt, makes the basic problem clear using an example calculation: In 2020, an investor financed an office property worth 100 million euros with a so-called loan-to-value ratio of 65 percent - and thus, in other words, received a 65 million euros bank loan.

If he were to finance this office property today, it would only be worth 80 million euros after a valuation correction of 20 percent. And if the bank has also become more cautious and only finances a loan-to-value ratio of 55 percent, this means for the financing: the investor no longer receives 65 million euros, but only a bank loan of 44 million euros (55 percent of 80 million euros).

In order to receive follow-up financing under the bank's new requirements, the investor must raise the missing 21 million euros elsewhere - which is hardly possible in many cases.

For Fedele it shows that “the refinancing gap has become a reality”. Although the forecast values ​​in 2027 will drop to around 32 billion euros in refinancing needs and a gap of almost four billion euros, “but that by no means means an all-clear”.

Many financings from the low interest rate phase would currently have to be renewed under completely different market conditions. Projects that seemed easily viable just a few years ago came under pressure. “What was worthwhile at interest rates of two or three percent quickly becomes uneconomical at four to five percent,” says Fedele.

However, lawyer Platt does not want to speak of a second wave of insolvencies, “but rather of the late phase of the same crisis”. In his opinion, remaining silent is now costing financiers equity and balance sheet capacity, which banks need for new business. His forecast: The crisis is likely to last until 2028.

Torsten Hollstein, managing director of CR Investment Management, also doesn't want to talk about a second wave. “The first wave never subsided,” he says. Over the coming years we will continue to experience bankruptcies, including among established market participants. “The fact that the topic is now in greater focus again is mainly because it has affected two well-known names, Pandion and Peters,” says the expert.

According to Konstantin Kortmann, Germany head of the real estate service provider JLL, pure project developers in particular are facing particular challenges in the current market phase: “They have no ongoing income from their projects, and at the same time construction and financing costs have risen significantly more than the achievable sales prices - a structurally difficult starting position,” he analyses. “For some, what makes matters worse is that their cash reserves have dwindled significantly.”

In his opinion, the fundamental challenges of the German real estate market remain: Firstly, prices have not yet been completely adapted to the new conditions. Secondly, equity capital is scarce because traditional investors have reduced their volume or withdrawn completely. Thirdly, some of the capital structures came from the zero interest rate phase and could not be reconciled with the current financing conditions.

Matthias Heimann, Managing Director at 777 Financial Advisors, who advises real estate companies on financing issues, observes that many financings have been extended in the past two years and that problems were initially postponed. “Now these extensions are expiring again – and they are being met by financiers who are financing much more conservatively,” says Heimann.

In addition, there are regulatory constraints, geopolitical risks associated with a rise in interest rates, continued high construction costs and uncertain exit scenarios. “That’s why developers who have so far come through the crisis comparatively well are also coming under pressure.”

Ralf Klann, refinancing expert at the world's largest real estate service provider CBRE, does not observe any general withdrawal from the real estate market on the part of financiers. According to a current CBRE survey, 71 percent of lenders active in Germany plan to expand their lending in 2026 compared to the previous year; only eight percent expect a decline. Project development financing also remains generally available: 69 percent of the lenders surveyed want to offer it.

However, there is still a clear difference compared to previous years: "Today, financing is much more selective. At 69 percent, refinancing makes up by far the largest share of the loan demand expected by lenders," he says. This shows how busy the market is currently with existing financing and expiring credit structures.

The quality of the individual project and the capital structure is therefore becoming increasingly important. “In the case of weaker projects, pending refinancing can make existing problems visible or exacerbate them,” says the expert.

Hollstein emphasizes that a large portfolio of financing from the low interest rate phase still needs to be adjusted to today's interest and valuation levels. Many of these cases have been initially postponed in recent years through extensions and other temporary solutions. “But this inventory will not dissolve on its own,” he makes clear. As long as this has not been dealt with, there will always be companies whose capital structure can no longer support the new framework conditions.