European Banks Lose Property-Loan Market Share as CMBS SoarsNeil Callanan and Patrick Gower
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.
Banks advanced 55 percent of European real estate loans last year, down from 67 percent in 2012, according to a report today by Cushman & Wakefield Inc.’s. corporate finance unit. Total lending rose by an estimated 30 percent in 2013, the New York-based 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.”
Commercial-property loans and real estate-owned sales reached 33.7 billion euros ($46 billion) during the year, up 47 percent from 2012.
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.
“We expect to see these lenders move up the risk curve and increase their penetration of the previously labeled ‘non-core’ markets, to take advantage of the plethora of opportunities available,” Mike King, a senior analyst, said in the statement.
The commercial mortgage-backed securities market rebounded with 8.6 billion euros issued last year, an eightfold increase on a year earlier, the report said. CMBS issuance this year may rise to between 12 billion euros and 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.
Europe’s banks trimmed their outstanding commercial real estate debt by 11 percent to 926 billion euros since the credit crisis roiled financial markets in 2008, broker CBRE Group Inc. said in a Jan. 28 report.