Lending for new investment and development soars in 2014 – C&W

Lending for new real estate investment and development in Europe surged 123% in 2014 as investor appetite for leveraged purchasing increased in response to improved market conditions, according to a new report from adviser Cushman & Wakefield.

Overall, real estate lending origination increased by 55% compared to 2013, with markets across Europe witnessing increased deal flow, lender competition and pricing compression. C&W’s European Real Estate Lending Market report defines origination as new investment lending, new development lending and existing loan refinancing. In 2013, origination rose 31% compared to 2012 levels.

The strong rise in new lending tracked by C&W compares with an increase of only 10% in refinancing activity. The firm tracked lending deals across Europe and monitored 186 lenders for the report.

The first half of 2014 saw a ‘huge increase’ in real estate lending compared to the same period in 2013, C&W said, with tracked origination volumes up 63%. H2 volumes – though up 44% year-on-year – did not quite reach the same level, possibly reflecting the return of economic uncertainty across Europe and associated political tensions.

Robust lending volumes were tracked across all major European debt markets in 2014. Spain stood out with origination more than quadrupling in 2014 compared to 2013 as real estate investment volumes surged by an estimated 170% year-on-year.

The report revealed that lending secured by multiple assets or portfolios accounted for 57% of tracked deals by value in 2014, up from 39% in 2013. Large portfolio lending increased ‘dramatically’, a trend that is expected to continue, C&W said.

Frank Nickel, executive chairman of Cushman & Wakefield’s EMEA corporate finance team, said: ‘The tracked increase in both volume and deal flow across Europe in 2014 reflects the general increased appetite for leveraged purchasing; the post-crisis European real estate debt market appears transformed.’

Little change in LTV levels is forecast for 2015, however some lenders are expected to move up the risk curve, he said.

‘LTVs for prime lending have stabilised and we do not expect significant movement in 2015. Margins will however respond to ever-increasing levels of competition, especially in the likes of Spain and Italy. Certain lenders may be motivated to vacate this super prime space, seeking instead to deliver higher returns further up the risk curve.’

Click here to read more about lending activity as tracked by C&W in Europe last year