Commercial property

Confidence high among UK commercial real estate lenders

Confidence among commercial real estate lenders is high, despite fears over political uncertainty, according to a new study.

The market trend analysis report from Link Asset Services has found that 72% of lenders expect the number of new loans they originate in the next 12 months to rise, compared with just 2% of respondents who predict a fall.

Over half of lenders (53%) planned to expand the size of their team.

Political risk was seen as the greatest threat to the commercial property market in 2018, with 70% of lenders highlighting it as their main concern, with Brexit the most frequently mentioned factor.

Lenders also predicted that interest rates would rise this year, with 71% expecting an increase.

Loan margins were expected to remain broadly the same, but where they have risen was in the higher-risk lending categories, such as bridging, mezzanine and preferred equity finance.

The research also found that the time taken to access finance has increased as some of the UK’s largest lenders continued to adapt to a raft of regulatory changes and internal restructuring.

On average, it now takes 53 days to get a commercial real estate loan, a seven-day increase on last year.

“We look set for an increase in lending activity in 2018, with current political risk not enough to undermine confidence,” said James Wright, head of real estate finance at Link Asset Services.

“One way in which lenders have adapted is by doubling down on low-risk senior finance.

“We have seen margins lower on senior debt, but rising on riskier lending products.

“In addition, this year lenders want to do relatively more lending in commercial sectors in comparison to residential, where they see greater risk to values in the year ahead.”

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