CB Richard Ellis' (CBRE) latest Capital Markets Report for the first three months of 2010 which focuses on banks' propensity to lend to real estate across Europe, reveals there has been a modest increase in maximum LTVs granted, with all key European markets now at or above 65%, accompanied by margin falls in Germany and the UK. Key indicators include an increase in the availability of development finance and more attractive pricing for mezzanine debt.
Conversely, one significant indicator of increasing lender confidence identified in the report has been the growing appetite for development finance a segment of the market which came to an abrupt halt in the very early stages of the credit crunch. This increase in availability of development finance is still in its infancy and remains restricted to good quality schemes with significant pre-let requirements, but nevertheless is a very positive development. CBRE's analysis also suggests that this trend is largely confined to the UK, France and Germany.
In addition, the report highlights a noticeable softening of the mezzanine finance market which is now operating at more attractive pricing levels. According to CB Richard Ellis Debt Advisory, there are more than 100 alternative lenders prepared to lend mezzanine finance - an encouraging sign that suggests opportunistic investors should be able to access the market with a combination of senior and mezzanine debt.
Natale Giostra, Head of UK & EMEA Debt Advisory at CBRE Real Estate Finance, comments: "Whilst still in its infancy, we are starting to see some signs of growing lender confidence. The early signs of activity in the development finance market are particularly encouraging, as is the offer of more attractively priced mezzanine finance. As the economic and occupier market outlooks become clearer and a continuing shortage of good quality space persists in some markets, we expect the development finance market to continue to pick up primarily in the UK, Germany and France in 2010, and more widely across Europe into 2011 and beyond."