Funding dynamics shift as UK investors gain confidence: Lloyds Bank

Investors in the UK appear more prepared to accept alternative sources of financing, according to the latest Commercial Property Confidence Monitor released on Friday by Lloyds Bank Corporate Markets together with the Investment Property Forum.

The survey, which polled 449 financial decision makers on the sources of funding they expect to use in the next 6-12 months, shows that 46% of medium/large businesses and a similar proportion of fund managers plan to use bank debt to fund their investments. This rises to almost two thirds (65%) for major businesses but only around a quarter (27%) for small businesses.

'This represents a fundamental shift in the dynamics of property funding,' said Lynda Shillaw, Lloyds Bank Corporate Markets' managing director of Corporate Real Estate. 'Three years ago we would have expected 80-90% of the market to be relying on bank lending.'

Significantly, more than a quarter (28%) of medium/large businesses mention their own equity, third party equity or cash reserves as their first preference for funding, together with a third of fund managers, around a quarter of major businesses and two fifths of small businesses.

While banks continue to lend on property, investors are increasingly using equity to allow them to execute deals quickly, often with a view to securing the right funding later, Shillaw said.