The level of outstanding commercial real estate debt in Europe currently stands at €926 bn, only 11% down on the €1 tln recorded at the peak of the global financial crisis in 2008, according to CBRE's European CRE Debt Model.
The level of outstanding commercial real estate debt in Europe currently stands at €926 bn, only 11% down on the €1 tln recorded at the peak of the global financial crisis in 2008, according to CBRE's European CRE Debt Model.
However, the figure understates the progress that has been made, CBRE said, noting that of today’s €926 bn total, around €143 bn is from debt that has been issued against new CRE transactions since the end of 2008.
Therefore, around €244 bn (24%) of the debt that existed at the end of 2008 has now been retired.
Despite some progress on the CRE debt stock, the issue of roll-over loans and short-term extensions has had a significant impact on the maturity profile. CBRE's model shows that 79% (€731 bn) of the outstanding debt is due to mature in the next five years. Although conditions in the lending market have eased considerably in the last 12 months, there is still far more maturing debt to absorb than there is lending capacity in the near term, the broker said.
New lenders, such as debt funds, insurers, private equity and capital markets, are still in their infancy and have not yet entered the market to the level required to make a significant impact. This, coupled with the fact that CMBS is still only at the early stages of reopening, means the process of unwinding Europe’s legacy real estate debt will continue to be a gradual one, with a high reliance on opportunistic loan purchasers.
'After a prolonged period when European debt strategies were dominated by extensions and forbearance, we are now seeing lenders take a more aggressive stance, actively dealing with their non-performing property loans,' commented Paul Lewis, head of special servicing at CBRE. 'The deleveraging process is now well under way, albeit concentrated in the UK,' he added.
