Commercial real estate debt financing in Europe: evidence from a network analysis

The commercial real estate (CRE) sector is a source of financial stability risk, yet its financing structures remain poorly understood because of complex corporate group structures and data limitations. This paper investigates the financing networks of the 100 largest CRE groups in the euro area, constructing two distinct networks: one for loan financing and one for bond issuance. The loan network exhibits strong regional clustering, a pronounced home bias and a core-periphery structure. Regional differences in loan financing patterns give rise to geographically concentrated communities of CRE entities with similar characteristics. The backbone of the loanmarket shows limited overlap among banks, both in the set of CRE borrowers they serve and in the size and composition of their loan portfolios, pointing to segmented lending relationships. By contrast, the bond network displays greater interconnectedness, is largely free of home bias and allows access to a diversified investor base. Financial stability implications are assessed through the structural properties of the networks and the identification of systemic nodes. In the loan network, regional clustering may amplify cross-border contagion, while highly central CRE groups in both networks could generate spillovers in distress, shaping credit allocation and systemic risk in the euro area. JEL Classification: G21, G28, R31, D85, C63