Insurers to the fore as banks retreat
CBRE’s Debt Advisory team has conducted research showing that insurers could be the key drivers of investment in commercial real estate this year, as they move to fill the gap left by retreating traditional lenders.
The team surveyed the 107 senior lenders with UK commercial property loan books in order to establish their attitudes towards liquidity and lending in the UK and across major regional cities. It has found that there are 69 lenders open to new UK business, but most are only lending cautiously.
Since the economic downturn began, 38 lenders with UK exposure have closed to new lending – of these, 70% were European banks, building societies and investment banks. The largest groups of lenders still active in the UK market are German Pfandbrief banks and UK banks, both clearing and non-clearing. However, some of these are seeking to reduce their exposure to legacy loans and so their new lending is very limited, CBRE says. The reduced competition in the market means that new lenders will find opportunities, and insurers are expected to be at the forefront in exploiting the retreat of traditional lenders.
Natale Giostra, head of UK and EMEA Debt Advisory at CBRE Real Estate Finance, said: “The arrival of new debt providers into the market is encouraging, but also brings complexity with it as borrowers will need to establish new relationships as several European and big UK banks have effectively withdrawn from new lending for the time being.”
The firm expects liquidity from all types of lenders to contract this year – apart from insurance companies – as a result of the new Basel III regulations and as a large amount of loans mature. Giostra added: “While perhaps there are more senior lenders active in the UK than some might have thought, competition for debt provision for refinancing, acquisitions and so on will increase in 2011. Many lenders are also likely to reassess their current approach and adopt more risk-averse strategies, as concerns about the wider economy and their impact of the real estate market hit home, resulting in more conservative and expensive terms on offer.”
The Telegraph reported this week that the state-backed Lloyds Banking Group and Royal Bank of Scotland have collectively reduced their commercial property lending by £14.5bn while HSBC and Barclays reported a drop of £2.7bn. The big four banks lent a total of £199bn.
