Commercial Real Estate Lenders Delay Day of Reckoning as Values Slide

October 6, 2025

Across Europe, commercial property lenders are increasingly choosing to renegotiate loans rather than seize distressed assets as building values continue to fall. Office valuations in London have dropped roughly 37 percent since early 2022, putting many borrowers in breach of loan terms. Instead of triggering defaults, banks are opting to “extend and pretend,” giving borrowers more time in hopes that interest rates will stabilize and valuations will recover.

Private credit funds and alternative lenders are filling part of the gap, providing rescue financing and flexible refinancing options to property owners who cannot secure traditional debt. Yet many analysts warn this may only postpone an inevitable correction if higher rates and lower demand persist. The standoff highlights how lenders are balancing short-term stability with the risk of deeper losses later in the cycle.