Demand for UK investment loans rockets in Q3: Laxfield

Loan requests to finance new property acquisitions rose sharply in the third quarter of 2013, triggered by greater investment activity in the UK, according to research by investment adviser Laxfield Capital.

Laxfield said it analysed in excess of £25 bn (almost €30 bn) of financing requests from UK property investors in the third quarter for its first-ever UK CRE Debt Barometer. This, it said, represented a significant proportion of the UK CRE secured finance market.

Based on this type of data, the barometer is designed to give an overview of current financing requirements in the UK commercial real estate market.

It found that demand for refinancing dominated the UK lending market in 2013 (67.9% by loan quantum). However, while debt refinancing constituted 89.7% of the total loan requirement at the beginning of 2013, new acquisition loan requests rose to 42.4% of the total volume in Q3, triggered by greater investment activity in the UK.

The number of requests for loans below £50 mln increased substantially during 2013, from 20.4% at the beginning of the year to 50.0% in Q3. Some 74% of loan requests in the category of less than £50 mln were acquisition-related, pointing to strong appetite outside the large-ticket core market.

Another finding was that the average deal size in London (£95.4 mln) stayed relatively constant over the year, whereas regional/national portfolio deals showed a strong decrease from £157 mln to £61 mln.

This trend, Laxfield said, reflected a move away from bulky refinancings as greater investment activity in the regions created new lending opportunities. The office sector led financing requirements in 2013 (38.1% of all loan requests), while increasing diversification into alternative sectors (from 20.0% in Q1 to 30.5% in Q3) reflected growing confidence outside core real estate.

The weighted average LTV requirement of 51.8% reflected a conservative use of leverage across the UK market in 2013. However, the average LTV request increased from 43.6% in Q1 to 58.3% in Q3, stimulated by enhanced market activity and improved confidence in the availability of financing.

Laxfield's release on the barometer can be accessed via the link below.