LONDON, April 25 Reuters Around one in five loans backing commercial real estate CRE in Britain, France and Germany that fall due between now and 2025 are likely to face refinancing challenges given higher interest rates, real estate management firm AEW said on Tuesday.

AEW estimated the CRE sector, made up of multifamily residential, offices, industrial, and retail, will face a 51 billion euro 55.95 billion debt funding gap through 2025 in these three countries.

The shortfall for debt maturing this year in the sector is around 17 billion euros, AEW forecast in a new report.

The gap is calculated as the difference between the original amount of the loans put in place between 2018 and 2020, and the amount that lenders will be keen to refinance at.

A surge in rates and declining property valuations compounded by structural changes since the COVID19 pandemic have placed CRE in the spotlight.

To bridge the estimated 51 billion euros funding gap, lenders and borrowers will have to be creative, meaning that either the equity owner puts in additional capital or another lender steps in or a combination of the two, said Hans Vrensen, AEW head of research and strategy.

If a restructuring is not possible, then the loans may be at risk of default.

The size of the funding gap forecast is unchanged from previous estimates in January and is concentrated in Germany.

Germany, Europe39;s biggest economy, accounts for 46 or 24 billion euros of the gap among big European economies…