The number of active European real estate lenders has increased by 29 per cent in the past 12 months, according to data published in Cushman & Wakefield's European Real Estate Lending Survey 2013.
For the survey, 109 global real estate finance providers were interviewed to assess lending appetite and assist in identifying key trends which will shape the European finance market this year.
According to the report, the number of active lenders – encompassing senior, stretch senior and mezzanine debt lenders based in multiple markets across Europe – open for both new business and to existing customers has increased by 29 per cent since Q1 2012. However, with many of these active lenders continuing to focus on prime assets located in core and/or domestic markets, the lending criteria in the main remains rigid and selective. Some lenders are willing to consider non-core markets and sectors but the margins demanded are considerably higher.
The survey also revealed the potential increase in available capital for European real estate debt in 2013. Cushman & Wakefield estimates there will be a 22 per cent increase in new debt available in 2013, compared with last year, after examining the difference between the levels of loans completed in 2012 and their targets for this year. However, a significant amount of this capital will be allocated to refinancing, as opposed to new lending.
In recent years, the number of lenders willing to underwrite loans of over EUR100m has been declining – but this has now reversed: 28 per cent of lenders surveyed stated they would underwrite EUR100m or more transactions. This compares to 18 per cent in Q1 2012. Of these lenders, 70 per cent are commercial and investment banks.
Cushman & Wakefield recorded a significant increase in active senior debt lenders during the last 12 months – 85 per cent of all active lenders are looking to provide senior debt; an increase of 20 per cent when compared to 2011. This includes 10 new entrants to the market and 10 lenders which were inactive in Q1 2012.
While the majority of lenders are reluctant to provide finance outside of their core markets, encouragingly, the report also highlights a handful of cross-border lenders showing an interest in the less liquid markets of Southern Europe. Given the depth of opportunities expected to emerge in countries such as Spain, Portugal and Italy in the coming months, the level of lending within these markets has the potential to pick up as the year progresses.
European debt funds have played a key role in the last 12 months in helping to fill the void left by many retreating banks and will continue to be a valuable source of finance going forward. The report estimates, based on the maximum target size of 38 senior and mezzanine debt funds open for investment, there is a total of approximately EUR24bn-worth of capital raisings to take place – this would significantly increase the supply of real estate debt available in Europe.
Michael Lindsay, head of EMEA corporate finance at Cushman & Wakefield, says: "The European real estate lending landscape remains dominated by the mainstream UK and German banks but more recent market entrants – especially those from the US – have started to make their mark. Q4 2012 and Q1 2013 witnessed a significant improvement in lending conditions; for the right assets, healthy competition exists amongst lenders, which is delivering pricing not seen since before the financial crisis."