(Bloomberg) -- German Finance Minister Christian Lindner said the market for commercial real estate is undergoing an “adjustment period,” with rising interest rates putting stress on the asset class across the globe.

“Interest rates are much higher than expected and so many companies are worried and have to correct their expectations,” Lindner said in a Bloomberg TV interview on Monday. “I think we have to be aware of the situation.”

Investors and executives have been on edge after smaller banks from New York to Tokyo were hit by rising defaults in commercial real estate, an asset class that’s been been in sharp decline as last year’s spike in interest rates compounded challenges from the shift to work-from-home. The concerns spread to Europe last week when the bonds of specialist lender Deutsche Pfandbriefbank AG slumped because of its exposure to the US market.

French and German banks have the most commercial real estate loans in the European Union, according to data from the European Banking Authority for the third quarter. Earlier analysis from the European Systemic Risk Board, a fellow watchdog, showed banks in Germany have the highest share of cross-border commercial real estate exposure among banks from the bloc’s major economies.

“The German banks which are involved in this business are under the supervision of the ECB,” Lindner said. “And so I’m not involved in this, but from all what I have known the market as a whole is stable, unless there is a need for new priorities and to rearrange projects due to the higher interest rates.”

Germany is also the epicenter of the euro area’s most prominent commercial real estate blow-up so far, the collapse of tycoon Rene Benko’s Signa group of companies. The decline of landlord Adler Group SA further underscores the troubles in the German market.

German banks have already built reserves to cover losses on souring credit. Deutsche Bank AG this month said it doubled the amount of money set aside for US commercial real estate loans in the fourth quarter from the previous three months. At the same time, it said it expects credit provisions this year to remain in line with where they were last year. US commercial real estate loans, at €17 billion, amount to about 3.5% of its total loan book.


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