Commercial property lending jumps 27% in H1
Lending in the UK commercial real estate market soared by 27% to reach £22.5bn in the first six months of 2018, according to a report by Cass Business School.
Lenders with balance sheets of between £1bn and £5bn were the most active group, responsible for 45% of new financing.
Ion Fletcher, director of finance policy at the British Property Federation, said: “The UK’s commercial property lending market seems to be in fairly good shape, despite ongoing political uncertainty.
Lending in the UK commercial real estate market soared by 27% to reach £22.5bn in the first six months of 2018, according to a report by Cass Business School.
Lenders with balance sheets of between £1bn and £5bn were the most active group, responsible for 45% of new financing.
Ion Fletcher, director of finance policy at the British Property Federation, said: “The UK’s commercial property lending market seems to be in fairly good shape, despite ongoing political uncertainty.
“However, this report also highlights the relatively higher levels of defaults on development loans versus investment loans. Development is inherently riskier, but it is fundamental to the success of our towns and cities, and further policy support from the government, such as better resourced planning teams in local authorities, could help de-risk financing for much-needed regeneration and housing delivery.”
Neil Odom-Haslett, president of the Association of Property Lenders, added: “The first half of the year has been one of caution amongst lenders and borrowers alike, although there has been some heightened competition amongst lenders for lower leveraged, prime offices (particularly in London) which has put pressure on margins.
Cass Business School estimates that the total amount of lending in the UK commercial property market is likely to exceed the £45bn-£55bn recorded in each of the past four years.
Its report also showed that 53% of lending came from new acquisition financing.
Of the £22.5bn of newly originated loans, 61% targeted London and the South East, while 14% financed portfolio transactions across several regions. Fewer lenders were financing transactions of single properties in specific regional locations. However, UK banks and building societies dedicated 52% of their lending to the UK regions.
Until 2016, the most rapid book-building was by North American and non-bank lenders. They have remained the most active lenders, but at a distinctly slower pace. In contrast, UK banks have stepped up their lending to the UK commercial real estate market in recent years. Since 2016, roughly 50% of their outstanding loans have been for the property sector.
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