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Commercial property lending increased by more than 50% and reached a six-year high by the end of 2014. According to the recent British Property Federation (BPF) report, this was due, in part, to non-traditional lenders entering the market in what is now an extremely busy commercial sector.

Insurance companies and other non-bank financiers were responsible for 25% of new loans, and whilst these lenders have only been included in the data since 2011, their market share increased significantly in the reporting period. These lenders came to the market '...due to regulatory changes and business opportunities created by the withdrawal of banks from this sector'.

The study also revealed that outstanding debt on commercial property declined over the twelve-month period to year-end 2014.

In addition to general debt reduction, the report states that distressed loans also fell by more than 50% helped by a robust property market and, more generally, a strong UK economy. At year end there was a more even share of outstanding debt between the 12 top lenders.

Intentions to lend at the end of the period were strong and more than 80% of providers expressed a commitment to increase their loan book.

In tandem with property values, loan to value ratios had risen to 70% or less and made up more than 75% of the overall outstanding debt.

While the general picture was buoyant, the commercial development sector continued to be comparatively difficult. There were just 17 lenders providing finance for fully pre-let projects and numbers dropped to single figures braving 50% pre-let. Only five organisations were interested in speculative commercial development.

Melanie Leech, chief executive of the BPF, commented: "The CRE (commercial real estate) lending market recovery is now well and truly established, with the further reduction of outstanding loans and the significant fall in the number of distressed loans indicating a healthier and more competitive market than we have seen for years.

"The increasing diversification of lenders has been marked over the past year, and we feel this is broadly positive for the market. Not only will a larger presence of non-bank lenders provide our sector with alternative sources of finance – lenders with different investment horizons and business strategies - a more diverse finance market can also contribute to financial stability by spreading exposure to UK real estate among a greater range of investors.

"We are concerned to see a reluctance to lend to speculative development, however. This is of particular importance for SMEs (small and medium-sized enterprises), whose growth we fear could be constrained if there is not readily-available business space to suit their needs."

Paul Saunders from Integritas, Caxtons' commercial finance business partner, added: "The landscape for commercial borrowing has changed for ever, with new entrants filling the void left by the main clearing banks. They tend to make quick decisions and back this up with a prompt and efficient service. Interest rates tend to be at a higher level than traditional lenders but in many cases, the certainty of provision is more important than the overall fees.

"High street banks do still support schemes, but tend to focus on established operators who have proven they can survive the full economic cycle and are not looking at high levels of gearing.

"It all goes to prove that the market will always find a way of moving forward and these new entrants provide a welcome alternative."

For further information contact This email address is being protected from spambots. You need JavaScript enabled to view it. or telephone Paul on 01474 537733.


Paul Saunders