European Banks Lose Property Lending Market Share as CMBS Soars

European banks, still repairing balance sheets after the credit crisis, are losing market share in the region’s commercial-property market as new lenders compete to provide credit, according to Cushman & Wakefield Inc.

Banks advanced 55 percent of European real estate loans last year, compared with 67 percent in 2012, according to a report today by Cushman & Wakefield’s corporate finance unit. Total lending rose an estimated 30 percent in 2013, the broker said, without being more specific.

New lenders moved in as banks struggled to sell or restructure loans that soured after the financial crisis. The number of debt funds and private-equity lenders rose 29 percent last year to 40, according to the report. Growing competition meant margins narrowed to as little as 3 percent for the best properties in Spain from 5 percent a year earlier, and shrank to 1.75 percent from 2.5 percent for buildings in the U.K.

The lending market is “slowly moving toward the U.S. model where the number of banks is equally matched by alternative lenders,” Michael Lindsay, head of Europe, Middle East and Africa corporate finance at Cushman & Wakefield, said in a statement. “We expect insurers, debt funds and private-equity firms alike to accelerate the development of their lending strategies.”

Faced with increased competition, lenders have been willing to advance credit in countries they had previously shunned. The number offering loans in Spain and Portugal rose 37 percent and 17 percent, respectively, while the percentage in the less volatile Nordic markets was little changed.

The commercial mortgage-backed securities market rebounded with 8.6 billion euros ($11.8 billion) issued last year, an eightfold increase on a year earlier, the report said. CMBS issuance this year may be from 12 billion euros to 15 billion euros, Cushman & Wakefield estimates.

While more than 40 debt funds are trying to raise 22.1 billion euros to lend against real estate, they’re only likely to get 5 billion euros from investors this year, the broker said.

To contact the reporters on this story: Neil Callanan in London at ncallanan@bloomberg.net; Patrick Gower in London at pgower@bloomberg.net

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

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