The dominance of traditional bank lenders – including both commercial and investment banks – in commercial real estate (CRE) lending in Europe is decreasing due to the rise of alternative lenders, according to Cushman & Wakefield’s annual European Real Estate Lending Review.
Cushman & Wakefield’s corporate finance team analysed the activity of 161 European lenders for the report – encompassing senior, stretch senior and mezzanine debt lenders – to assess lending appetite and identify key trends which will shape the European finance market this year.
CRE loans originated and refinanced over the past two years were also tracked in order to see which sectors and markets were the most active.
Although banks accounted for more than half (55 per cent) of all CRE lending analysed in the survey, their market dominance has been diluted in the past 12 months: the proportion of traditional banking lenders has fallen from 67 per cent in Q1 2012.
The report states that although banks are not necessarily lending less, their market share has been driven down by the presence of new alternative lenders. For example, there has been a 29 per cent increase in the number of debt funds and private equity lenders since Q1 2013.
Based on data taken from the survey, Cushman & Wakefield’s corporate finance team also recorded a significant 30 per cent increase in the amount of capital lent against real estate in the last 12 months. Meanwhile, a 10 per cent rise in the number of active lenders has led to greater competition and a reduction in pricing across European markets.
Michael Lindsay, head of EMEA corporate finance at Cushman & Wakefield, says: “We have seen the European lending market become increasingly diverse over the last 12 months, slowly moving towards the US model where the number of banks is equally matched by alternative lenders. With regulatory burdens exerting pressure on the profitability of CRE lending for banks, we expect insurers, debt funds and private equity firms alike, to accelerate the development of their lending strategies.”