European debt market on sound footing, says CBRE

CBRE's European Debt Map, which compares lending terms across 20 European countries, identified Berlin and Paris as the cities with the lowest senior debt returns, at 1.42% and 1.52% respectively.

Of the Western euro-denominated markets, the highest returns for senior, mezzanine and whole loan debt are to be had in Dublin (2.72%), Madrid (2.52%) and Lisbon (2.42%).

CEE, as might be expected of less liquid emerging markets, sees the highest returns for senior, mezzanine and whole loan debt; Bucharest and Warsaw at around 5%, Prague at around 4% and Budapest and Bratislava at around 3%.

Lenders remain disciplined
On the risk side, generally lending standards remain disciplined. Interest cover ratios, for example, are uniformly high, giving lenders comfort in the ability of borrowers to service debt payments through property income.

On the capital side, lenders continue to look very closely at debt yields in search of additional comfort, although in a few more established economies, debt and property yields are creeping more closely together.

Marco Rampin, head of debt and structured finance, continental Europe, CBRE advised lenders should to take every opportunity available to expand and deepen their network of contacts with potential borrowers, to ensure access to every possible lending opportunity.

'The last few years has seen a huge volume of capital raised for investment in debt strategies across Europe, by and from a diverse source of investors. Having deployed €6 bn of real estate lending in continental Europe since June 2016, we have seen first-hand the strength of competition for all deals and our recent EMEA Investor Intentions Survey highlights the growing interest from investors in targeting real estate debt. This most recent research suggests that lender appetite will remain extremely keen across Europe, given the strong low-risk returns available.'