Following post-pandemic tightening of monetary policy in advanced economies, commercial real estate (CRE) markets have been under pressure globally, including in Germany. This paper explores the channels of CRE impact for the German financial sector, and the potential size of impact for individual German banks based on publicly available data. It finds that German banks, in aggregate, are adequately capitalized and sufficiently liquid to absorb potential losses. However, elevated CRE-related credit risks suggest the need for close monitoring of some individual institutions, conservative capital distributions, adequate loan-loss provisions, retention of macroprudential buffers, and testing of financial safety arrangements.