Alternative real estate lenders climb to 40%

Alternative lenders including insurance companies, property companies, private equity and debt funds now account for roughly 40 percent of all active European real estate lenders as at Q2 2014, according to research from real estate advisory firm Cushman & Wakefield (C&W).

The figure is a sizeable jump from 16 percent of all active lenders as at Q1 2012, as reported in C&W’s European Real Estate Lending Update H1 2014.

C&W’s Corporate Finance (CWFC) team analysed the activity of 182 European lenders to arrive at the findings, tracking a total of €32.7 billion of real estate lending during H1 2014, including €27.3 billion of origination. According to its data, there are 39 funds currently providing real estate debt. 

The firm expects that with the banking community returning to normalisation however, the proportion of alternative lenders will remain static at 40 percent of the lending sample.

Echoing similar findings in a real estate loan sales report that C&W published last week, the drive to lend into non-core markets, including Spain, Portugal and Italy, has also gathered pace during the first half of the year. 

“Given the number of opportunities that have emerged in Spain, Portugal, and Italy, CWCF expect lending demand to intensify from lenders looking to move up the risk curve,” the report stated.

The core markets of Western Europe, such as the UK, France and Germany remain the top targets for real estate lending however, with 60 percent of all tracked loans during H1 2014 secured by assets in these markets. 

The pressure on margin compression has eased over the last quarter, C&W said, as lenders are becoming riskier in their approach “in search of superior returns.”

Frank Nickel, chairman and chief executive of Germany, EMEA Corporate Finance, said: “Despite the supply of debt steadily increasing in most European markets, margins seem to have stabilised over the past quarter. This has helped accelerate the movement up the risk curve for many lenders.”