German and UK lenders face a number of challenges in addition to the increased competition in the market that affects all lenders.
German and UK lenders face a number of challenges in addition to the increased competition in the market that affects all lenders.
UK lenders remain constrained by ‘slotting’ issues that can make it hard for them to compete with their continental counterparts. ‘Slotting is one of the biggest challenges for UK lenders and in certain situations it makes it hard for them to compete with the German lenders,’ said Edward Daubeney, head of debt advisory at DTZ in London. ‘Also, there’s just so much equity in the market and not everyone is looking for debt,’ he added.
Another challenge is ‘to know where to draw the line and how much risk to take on’, said Bernhard Scholz, member of the management board at pbb. ‘Money is flooding into European real estate markets and some investors who used to be conservative are now branching out into development or into C locations. That’s not our strategy. We look closely at the fit between the sponsor and the investment and will walk away if the fit isn’t right.’
William Newsom, senior director of Savills’ valuation team in London, agrees: ‘The whole range of new lenders trying to increase their market share means that debt is being made available at cut-price terms, so there is a lot of risk out there.’
In addition, the looming threat of an increase in interest rates continues to test investor confidence. ‘I’m interested to see what will happen if interest rates do go up next year – and who will survive that,’ said Frank Nickel, chairman of corporate finance for the EMEA region at Cushman & Wakefield. For Newsom, ‘the big worry is what happens when interest rates rise as inevitably there will be an impact on asset values. If that impact is negative, it becomes a question of how lenders get their money back.’