European Private Real Estate Debt – A Strategic Opportunity for Insurers

This article was produced by Invesco as part of their valued industry partnership with Insurance Investor.

The European private real estate debt market is increasingly being recognised as a strategic asset class for insurers and reinsurers. Several factors make this space particularly attractive right now:

1. Emerging Opportunity and Market Evolution
As traditional banks have pulled back from certain lending segments, private real estate debt has become a more accessible and appealing option for institutional investors. The market has diversified, offering a broader range of risk-return profiles and allowing investors to tailor their exposure through instruments like senior loans, mezzanine debt, and whole loans. Notably, senior loans offer security and stable returns, while mezzanine debt provides higher yields for those willing to take on more risk.

2. Diversification and Portfolio Benefits
Private real estate debt stands out for its ability to deliver predictable income streams and stability of returns, with lower volatility compared to equities. For insurers, this means improved asset-liability matching and a more robust solvency position. The asset class is less correlated with traditional equity and fixed income, enhancing overall portfolio diversification. In fact, private real estate senior loan margins are currently averaging 305 basis points, significantly higher than BBB-rated corporate bonds at 160 bps¹.

3. Favourable Market Conditions
Recent macroeconomic shifts—such as post-pandemic stabilisation in property valuations and lower Eurozone interest rates—have created a supportive environment for lending and increased market liquidity. The capitalisation rate spread in Europe has widened, indicating a more attractive risk-return profile compared to other regions.

4. Risk Management and Due Diligence
While the benefits are clear, success in this market hinges on rigorous risk management and local expertise. Insurers typically partner with experienced asset managers to conduct thorough due diligence, especially around loan structuring and enforcement in different jurisdictions. Local market knowledge is essential for assessing collateral quality and ensuring successful exits, as property liquidity can vary significantly by region and asset type.

5. Outlook and Strategic Considerations
Looking ahead, the European market is expected to evolve further, with alternative lenders likely to expand their presence and introduce more innovative financing structures—mirroring trends seen in the US. Currently, alternative lenders hold just 10% of the European market, compared to over 40% in the US, highlighting significant room for growth. The estimated market size of €2 trillion underscores the scale of the opportunity.²

1 Sources: Bloomberg and the FY Bayes Report 2024. Using ICE BofA BBB Sterling Corporate Index monthly asset swap spreads from Jan. 31,2001 to Dec. 31, 2024 which are averaged per calendar year, to compare to the yearly average senior margin on: office, industrial and retail sectors in the UK.

2 Source: Bloomberg, Bayes Report and Invesco as of Mar. 31, 2025.

Read the full article here.

Investment Risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information
This marketing communication is exclusively for use by professional investors in Continental Europe as defined below, and Professional Clients in Dubai, Ireland and the UK. For Professional Clients, Exempt Investors, Accredited Investors or Non-Natural Qualified Investors in the Middle East. It is not intended for and should not be distributed to the public.

For the distribution of this communication
- Continental Europe is defined as Austria, Belgium, Denmark, Finland, France, Germany, Italy, Liechtenstein, Luxembourg, The Netherlands, Norway, Portugal, Spain, Sweden and Switzerland
- The Middle East is defined as Bahrain, Qatar, Oman Kuwait, Saudi Arabia and United Arab Emirates.

Data as at 19 September 2025, unless otherwise stated. By accepting this material, you consent to communicate with us in English, unless you inform us otherwise.

This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change.

Issued by: Invesco Management S.A., President Building, 37A Avenue JF Kennedy, L-1855 Luxembourg, regulated by the Commission de Surveillance du Secteur Financier, Luxembourg; Invesco Asset Management, (Schweiz) AG, Talacker 34, 8001 Zurich, Switzerland; Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority; Invesco Asset Management Limited, Index Tower Level 6 - Unit 616, P.O. Box 506599, Al Mustaqbal Street, DIFC, Dubai, United Arab Emirates. Regulated by the Dubai Financial Services Authority.

EMEA4829231/2025