The Lending Rollercoaster continues…

The rollercoaster of financial crisis and sovereign debt continues and it seems certain that the European banking crisis is going to have profound and long-lasting implications for the commercial property sector. This is just one of the headlines from our latest Lenders’ Expectations report.

Other findings from the 2011 report are as follows:

  1. Although more respondents this year were willing to lend between £50 millions and £100 million, the survey found that less than 40 percent of respondents thought they would be lending amounts above £100 million by the end of 2011, compared with around 50 percent thinking they would do so in last year’s survey.
  2. Refinancing will dominate in the next two years – almost 50% of lending activity has been and will be focused on refinancing. A number of respondents stated that refinancing will consume between 70% and 80% of lending.
  3. For new lending, the office sector is by far the most popular with an average weighting of over 40% for each of the three years. Lenders see this market, especially in London, as one of the most transparent and easiest to judge, mirroring the institutional interest in direct acquisitions.
  4. Several respondents believe that more secondary assets are likely to come onto the market and will become more financeable. Consequently there is a sizeable increase in prospective lending for secondary assets, from 13% in 2009 to 20% this year and further increases in 2011 and 2012.

What is certain is that the lending markets are quick to change and fluctuate, and it has become clear throughout our interviews that credit conditions are shifting. A year ago we were predicting greater liquidity than we are now experiencing and the outlook is similarly challenged. There is without a doubt a polarising of debt provision – borrowers with strong existing relationships are well placed to access the lending markets, whilst although not impossible for new entrants, the challenges are still there.