European Banks Trimmed Property Debt to $1.3 Trillion, CBRE Says

Europe’s banks have trimmed commercial real estate debt by 11 percent to 926 billion euros ($1.26 trillion) since the credit crisis roiled financial markets in 2008, broker CBRE Group Inc. said in a report today.

Outstanding debt tied to commercial property is down by just 101 billion euros from more than 1.03 trillion euros in 2008 after many banks opted to extend loans rather than seek repayment, the Los Angeles-based company said in a statement today. An estimated 731 billion euros of the total will come due in the next five years, according to CBRE.

“After a prolonged period when European debt strategies were dominated by extensions and forbearance, we are now seeing lenders take a more aggressive stance,” Paul Lewis, head of special servicing at CBRE, said in the statement. “The deleveraging process is now well underway.”

European banks have been trying to reduce exposure to real estate assets since 2008 by selling portfolios of non-performing loans. While lending conditions have “eased considerably” in the past year, there’s still more maturing debt to absorb than there is lending capacity in the near term, according to the statement.

“Many euro zone banks still retain a large debt overhang and until the ‘new lenders’ enter the market in earnest, there is unlikely to be enough debt retired to hit maturity deadlines,” Lewis said.

The unpaid debt includes about 140 billion euros loaned out since 2008, according to the statement. It doesn’t include a “very substantial amount” of loans secured by residential property or development land, the broker said.

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