Continental European countries appear to be catching up with the UK in terms of new loan originations, a new study by Cushman & Wakefield reveals.
While the UK maintains its position as the main market in Europe where lenders anticipate focusing their activity, its dominance has been diluted since the vote to leave the EU.
‘The shift in lending activity in the UK has mirrored the investment activity we’ve seen there since the middle of last year, particularly in the wake of Brexit,’ commented Nigel Almond, head of Capital Markets research at Cushman & Wakefield, who authored the survey.
The UK’s share of the lending market now represents 21% compared to 25% at the start of 2016, while Germany has seen its share rise to 17% from 15% a year ago and France now stands at 13% (12%). The Benelux countries have seen an even sharper increase over the same period to 15% (12%), while the Nordics have edged up to 13% (11%).
‘While the Benelux region has increased its share, it’s also fair to say that the Netherlands was probably slightly behind in the cycle. We’re now seeing much stronger growth there in terms of investor interest and that’s what’s driving the increased lending. Lenders follow where borrowers want to go,’ Almond said.
Nordics is another stable market
The situation in the Nordics also reflects ‘another stable market which tends to stay out of the fray politically’. Germany, while attracting strong interest, was ‘limited’ to only increase its share by two percentage points ‘possibly because of problems of access to product’, he added.
While investor interest in Southern Europe had grown over the last 12 months, the effect on lending was still waiting to catch up, Almond said, with Spain losing a percentage point of its share, and Italy dropping two, ‘due to concerns about its banking sector’.
Indeed, while the UK’s share of the lending market has fallen, Almond said that it was likely to remain one of the preferred financing markets in Europe.
‘The UK is a large and liquid market, and we’ll always see demand there from investors,’ he noted. ‘Regardless of this wider, political situation, and even as Brexit begins to unfold, lenders will always be willing to lend there. Even before the Brexit vote, there had been a little bit of a softening in activity in the UK, it had moved ahead of the cycle, so the shift to other markets coming through is part of natural market movements.’
More than 80% of European commercial real estate lenders expect to see an increase in new loan originations within the next six months or at least maintain current levels of activity, according to the survey, as competition remains intense for lending on prime buildings in trusted markets across the Continent.
‘We are seeing strong activity,’ concluded Almond. ‘Lenders have been more selective when it comes to secondary, and there’s not much appetite for development, but this may change.’
