Thought of the Week
Is commercial real estate lending activity increasing?
July 18, 2024 2 Minute Read
As has been widely reported, 2023 was not a stellar year for UK commercial real estate, with both investment and loan origination volumes down by around a third. And, so far in 2024, investment activity has remained muted. Still, there are reasons to be optimistic. According to our first CBRE European Lender Intentions Survey, UK real estate lenders are expecting to originate more loans in 2024. While lending might not return to its previous level immediately, these responses are encouraging.
33 UK-based lenders responded to the survey, including 14 banks and 15 debt funds. 79% of these lenders expected to originate more real estate loans this year, which is more positive than the 63% of lenders across Europe as a whole. More than half of UK lenders were anticipating at least a moderate year-on-year increase (over 10%) in originations by the end of the year.
Figure 1: How will origination activity change in 2024 compared to the previous year?
These results might seem surprising given the subdued level of investment thus far in 2024. However, there is still high demand for debt capital due to loans that are maturing and need refinancing this year. These include some loans with 2023 maturity dates, on which short-term extensions were negotiated. 70% of UK lenders identified refinancing as the primary source of demand for loans in 2024. Yet, while refinancing opportunities are facilitating increased activity this year, 88% of UK lenders cited continued low levels of investment activity as a major challenge for the current lending environment.
Lender interest is not confined to just one or two sectors. While multifamily and student accommodation were ranked as the most attractive by UK respondents, the results indicate that sentiment among lenders has improved towards most asset types. Overall, the findings from our survey give us confidence that debt is available for good quality real estate investments as market conditions improve.
