Europe's funding gap rises 4%: DTZ

The European real estate debt situation is continuing to erode at a time when the global situation is showing signs of improvement, according to new research by property adviser DTZ. The firm found that Europe's debt funding gap rose 4% to $122 bn (EUR 90 bn) in the last six months. In contrast, the global debt funding gap is estimated to total $142 bn over the next three years, a reduction of 27% on the $196 bn estimated in May 2011, and half the level reported a year ago.

The funding gap is defined as the difference between the existing debt balance secured by commercial property as it matures, and the debt available to replace it.

DTZ notes in its latest 'Global Debt Funding Gap' report that there are significant variations at a regional level. The increase in the gap in Europe follows the downgrading of the property adviser's forecast of capital values for the region.

However, compared to DTZ's analysis in November 2010, Europe's debt funding gap has narrowed by 27% from $167 bn, reflecting a partial value recovery.

At a country level the research found a small increase in the funding gap across Europe, including the UK (+4% to $43.8 bn), Spain (+17% $28.7 bn) and Ireland (+10% to $13.5 bn). The exceptions include France (down 25% to $8.1bn) and Germany (down 16% to $5.5bn) where the outlook has shown a modest improvement. On a relative basis, Ireland remains most exposed with its debt funding gap equivalent to 21% of its invested stock. Spain and the UK also have relatively high debt funding gaps equivalent to 6% and 5% of invested stock respectively.

DTZ estimates more than $399 bn is needed to match the overall debt funding gap. This is more than three times the level of the debt funding gap. Again there are regional variations. In Europe the amount of available equity is just $156 bn, 28% above Europe’s debt funding gap of $122 bn. In Asia Pacific available equity is more than four times the debt funding gap.