New lending to commercial property increased by more than 50 per cent and reached a six-year high in 2014, with non-traditional lenders increasing their share of the market.
The value of commercial property loan originations – the process of creating a loan – soared to £45.2 billon at year-end 2014, compared with £29.9 billion in 2013. This was the highest figure since new lending reached £49.82 billion in 2008, according to the independently compiled De Montfort Commercial Property Lending Report.
Insurance companies and other non-bank lenders accounted for 25 per cent of new loan originations. Insurance companies also increased their share of total debt to 12.7 per cent, up from 10.2 per cent last year, with other non-bank lenders taking a 6.5 share, compared with 3.7 per cent in 2013.
Lending intentions remained strong, with 82 per cent lenders intending to increase their loan book size and 84 per cent intending to increase loan originations.
However, the report showed that the market for commercial development finance remained relatively challenging. Only 17 organisations were reported to be willing to lend, even against fully pre-let development, but the number fell to seven organisations for 50 per cent pre-let/50 per cent speculative development schemes and just five organisations for speculative commercial development.
Melanie Leech, chief executive of the British Property Federation, said: “The increasing diversification of lenders has been marked over the past year, and we feel this is broadly positive for the market. Not only will a larger presence of non-bank lenders provide our sector with alternative sources of finance…a more diverse finance market can also contribute to financial stability by spreading exposure to UK real estate among a greater range of investors.
“We are concerned to see a reluctance to lend to speculative development, however. This is of particular importance for SMEs, whose growth we fear could be constrained if there is not readily-available business space to suit their needs.”
With the new lending figures suggesting that the commercial property market is in good health, Palmers’ Commercial Property specialists can provide expert advice to individuals and organisations operating in this sector, to help maximise the smooth progress and cost-effectiveness of transactions and projects.
Our expertise includes property financing, site assembly, leasehold and freehold acquisitions and disposals, joint ventures and advice on retail, office and industrial development.
For more information on Palmers’ commercial property services, please contact Carey Jacobs or Maisie Yau.