The first signs are emerging of a positive shift in sentiment amongst banks since early 2008, albeit heavily concentrated on the top end of the commercial real estate market in Europe, according to CB Richard Ellis. In its latest European Capital Markets report, CBRE says banks now find themselves in a more confident position to lend following the recovery in the European real estate investment market in the latter half of 2009.
The first signs are emerging of a positive shift in sentiment amongst banks since early 2008, albeit heavily concentrated on the top end of the commercial real estate market in Europe, according to CB Richard Ellis. In its latest European Capital Markets report, CBRE says banks now find themselves in a more confident position to lend following the recovery in the European real estate investment market in the latter half of 2009.
This recovery has been driven by increased appetite from equity buyers and an improvement in capital values. The shift in sentiment has subsequently led to increased competition amongst debt providers to offer improved lending terms on loans secured against prime real estate.
Natale Giostra, head of UK & EMEA Debt Advisory at CBRE Real Estate Finance, commented: 'Key lending terms for prime real estate stock and credible tenants have improved significantly over the last couple of months. Maximum loan size is generally increasing, with maximum LTVs also on the increase at around 60-70% when secured on prime real estate, whilst margins have fallen across most markets.
'What is particularly worth noting is that this trend is not confined to the UK. We see a theme of consistency running throughout Europe, with Italy, the Netherlands and Spain also reporting an increase in maximum LTVs to 65-70%.'
Tim O’Sullivan, head of Capital Markets at CB Richard Ellis Hungary, added: 'These positive signs in lending will eventually ripple into the CEE and Hungarian markets. However, we will have to be patient for now.'
Despite the recovery in sentiment, debt market activity remains distinctly polarised mirroring the direct real estate investment market. Lending outside the prime segment of the market remains limited, most notably in respect of development finance, which continues to remain broadly unavailable in many markets. Those banks that are prepared to lend outside the prime real estate remit have employed more stringent financing terms, and margins are considerably higher.
