'Scary' levels of maturing debt in commercial property sector reported

'Scary' levels of maturing debt in commercial property sector reported



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A prominent survey from De Montfort University has shed light on the troubled UK commercial property sector, revealing that nearly £43 billion of commercial loans are due for repayment this year.

According to the report, the number of loans in default has leapt by 800% to 3,230, whilst the value of loans in breach of banking agreements has increased sixfold.

One banker labelled the levels of maturing debt “scary,” adding that there was a risk of a multi-billion pound funding gap, as banks under pressure continue to retreat from lending.

However, there is an upside to the grim landscape of falling property values, soaring levels of debt and lack of lending activity – the commercial property sector has been deemed “too big to fail”, with banks more likely to extend loans rather than call them in and be forced to sell property assets at slumped prices.

Author of the report, Bill Maxted confirmed this, saying: “Banks have been reluctant to flood the market with properties when the market is in such a depressed state. Instead they are working with their borrowers.”

The report also uncovered that the total value of outstanding debt in the sector rose by 8.5% to £225 billion at the end of last year – indicating that some banks continued to lend even as commercial property values plummeted.

 

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