European Commercial Property Deals to Outpace U.S. as Banks Divest Assets

Investors will buy and sell more commercial real estate in Europe than anywhere else in the world this year as banks dispose of riskier properties and purchasers find it easier to borrow money, DTZ Group Plc said.

European transactions will probably rise 20 percent to $164 billion, the London-based property broker said in a report today, citing surveys of banks and investors that own more than $1 trillion of assets or loans. Sales in Asia will probably be little changed at $158 billion, while U.S. deals will rise 9 percent to $50 billion.

Investors have earmarked about $140 billion to spend on European real estate during the next three years and most of those surveyed by DTZ said borrowing has become easier, the firm said. Though there currently isn’t enough available credit to cover all the property debt maturing through 2013, the shortfall narrowed by 6 percent since November after prices recovered, banks made provisions for bad loans and new lenders such as insurers entered the market

“Bridging the funding gap may not be as difficult as originally anticipated by many,” said Magali Marton, head of research for Europe, the Middle East and Africa at DTZ.

While 80 percent of banks surveyed said they have dealt with delinquent loans tied to prime properties, most haven’t addressed bad debt tied to lower quality buildings in less desirable locations. Most respondents said they expect sales of distressed non-prime properties to accelerate, and 89 percent said that more of it will be put on the market in 2012.

Sixty-four percent of investors surveyed said they had no difficulty finding non-prime properties to buy and 58 percent said obtaining new acquisition finance isn’t a problem.

DTZ surveyed lenders with real estate loans totaling $334 billion and investors that own or manage assets valued at $708 billion. The firm conducted the survey in March and April.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.