Some 59% of Europe's largest banks are effectively closed to new business and are not lending against commercial real estate, a survey by Cushman & Wakefield has found. However, there is appetite from the remainder for lending against well let prime assets with established borrowers, the adviser added.
Some 59% of Europe's largest banks are effectively closed to new business and are not lending against commercial real estate, a survey by Cushman & Wakefield has found. However, there is appetite from the remainder for lending against well let prime assets with established borrowers, the adviser added.
The survey, held among 83 of Europe's largest banks, found that only 22 that are lending to new clients while many have caveats regarding how much they would lend and to whom. Conditions include the investor having a proven track record with a pipeline of deals or having a minimum net worth. Of these 22 lenders, half preferred deals involving lot sizes of less than £20 mln (EUR 22 mln) with the rest able to finance deals as much as £50 mln.
In addition to the decline in the number of lenders, loan-to-value ratios have also fallen demonstrating that banks are demanding less risk in acquisitions. In the UK the ratios are 60-70% down from 80-85% before the economic downturn. In Western Europe the ratios are 50-60% down from 85-90%.
The lack of lending against commercial property has led to a huge fall in the volume of completed deals. Global investment in commercial property fell 59% in 2008 to $435 bn (EUR328 bn), down from 2007's record total of $1.050 bn. This was the lowest annual total since 2004 with a significant decline in investment from foreign investors. Figures from Cushman & Wakefield’s Investment Atlas 2009 also predict that volumes will fall again this year to around $412 bn.
