UK - Debt held against UK commercial property fell by 3.4% during the first half of 2011 as the market continued to show resilience in the face of global economic turmoil and stagnant UK growth.

According to the latest UK Commercial Property Lending Market mid-year report by De Montfort University, the value of outstanding, on-balance-sheet debt fell from £208.4bn (€244.3bn) to £201.3bn in the six months to June 2011.
 
In addition, the report noted that half of this debt, in a range of £85bn - £114bn, could not be refinanced on current market terms and that one quarter was secured on a loan-to-value ratio of more than 100%.

Bill Maxted, co-author of the report and lecturer at De Montfort University, said: "Lending organisations commented that the existing liquidity crisis had been made more acute by the problems of European sovereign debt and the unknown extent of contagion between banks.
 
"Respondents have suggested that only an increase in confidence in the UK economy, demonstrated by a number of quarters of sustained growth in UK GDP, would signal a recovery in the commercial property market in the UK."

The study also revealed that the level of debt in the UK for commercial properties stood at between £280bn and £292bn in June this year, including £46bn outstanding in the CMBS market and an estimated £19.9bn held by Ireland's National Asset Management Agency.

Liz Peace, chief executive of the British Property Federation, said: "These figures underline how critically important it is for government to use all of the tools at its disposal to help tackle this overhanging property debt."

Peace went on to say that the government should encourage new debt buyers by reforming the real estate investment trust regime to allow the creation of mortgage REITs.

Speaking at the IPD/IPF Property Investment Conference in Brighton at the end of last month, Peace said that the introduction of the new REIT would be unlikely to occur before the Finance Act of 2013, as the Treasury would need to have launched a consultation by now to include legislation in next year's Budget.

However, she added that the Treasury "certainly" had not dismissed the idea out of hand, with KPMG's global head of real estate arguing that its introduction would be possible as the political climate was in favour of increased construction.

In addition, Peace also suggested that stopping charging full business rates on empty commercial properties would help to find new debt buyers.

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