Offices most popular asset class for project finance: EC Harris

Offices are the most attractive asset class for European banks looking to lend to property developments, according to the latest European Property Finance Trends report from EC Harris, the global built asset consultancy.

The annual study, which surveyed bankers at 29 banks across eight European countries, found that 26% had a preference to lend to office developments over the next five years, followed by retail and residential in equal second place.

Retail’s popularity with lenders dropped by 5% from last year, whilst residential increased by 4% due to initiatives across many European countries to promote house building. Student accommodation was the least sought-after asset class with just 6% of bankers citing it as an asset type of interest to them.

Overall, the study found that 83% of bankers thought there had been either no change, or a fall, in lending to property developments over the past 12 months. The reasons for this included the ongoing instability of the eurozone and many banks remaining cautious about, or pulling out of, real estate funding altogether.

However, looking ahead, the survey found that UK bankers were much more optimistic than their European counterparts, with two thirds (66%) confident that that there would be more lending to development projects over the coming five years, compared to less than half (48%) of bankers in mainland Europe.

Matthew Cutts, head of Lenders & Investors at EC Harris said: 'Whilst conditions remain difficult, there are still opportunities for developers seeking development funding from banks. Pre-let assets, particularly offices, are the most desirable for bankers, offering a stable return, over riskier, speculative developments.'