In a new report by CB Richard Ellis, over 100 senior lenders with a real estate loan book have been approached to establish liquidity and lender attitudes in the UK and major regional cities, providing significant insight into the depth and composition of the market.
The report, undertaken by the Debt Advisory team, finds that, while there are 69 lenders open to new business in the UK, a number are lending only cautiously and most are employing conservative criteria, against which they assess opportunities.
German Pfandbrief banks and UK banks (both clearing and non clearing) are the largest groups of lenders to the market, and are expected to continue to hold a dominant position for some time. Since the onset of the downturn, 38 lenders with UK exposure have closed to new lending of which 70% were European banks, building societies and investment banks, the traditional providers of debt to the industry.
Reduced market competition, coupled with attractive regulatory drivers, has provided a significant market opportunity for new lenders to enter this space and the report highlights that it is insurance companies that are likely to have the greatest impact on the market in 2011.
Natale Giostra, Head of UK and EMEA Debt Advisory at CBRE Real Estate Finance, commented "We expect insurance companies to continue to exploit the retreat of traditional lenders and further establish themselves in the UK in 2011. The arrival of new debt providers into the market is encouraging, but also brings complexity with it as borrowers will need to establish new relationships as several European and big UK banks have effectively withdrawn from new lending for the time being."
This year, it is also expected that liquidity from all types of lenders in the market will contract (with the exception of insurance companies) due to the twin effects of Basel III and as the huge amount of loans coming to maturity filter in to the market.
Natale added: "While perhaps there are more senior lenders active in the UK than some might have thought, competition for debt provision for refinancing, acquisitions and so on will increase in 2011. Many lenders are also likely to reassess their current approach and adopt more risk-averse strategies, as concerns about the wider economy and their impact of the real estate market hit home, resulting in more conservative and expensive terms on offer."