Commercial lending rises despite struggles of smaller investors

The Commercial Property Lending Report by De Montfort University, which was compiled using data submitted by almost 60 lenders, found that £53.7bn in new loans were advanced in 2015, up from £45.2bn the previous year.

The number of ‘distressed’ loans, where borrowers had problems paying, fell by almost 50%.

Ian Fletcher, director of policy, financem at the British Property Federation, said the fall in value of distressed loans coupled with an increase in new loan originations hints at a “robust and stable commercial property lending market”.

“It will be interesting to see whether commercial real estate lending accelerates from here or grows in a more measured way,” he said.

The majority of loans were secured for real estate in London, with 43% of the total outstanding debt secured against property in the capital – the highest level ever recorded by the research, which began in 1997.

It found that lenders were more inclined to lend for large developments, with just fourteen banks, building societies and insurance companies willing to write a loan for £5m or less for commercial projects, compared to 31 who said they lend above £100m.

Fletcher said it was surprising investors were still targeting London.

“Given growing investor interest in the regions over the course of 2015 and the government’s efforts to devolve greater powers to local areas, it is perhaps surprising that lenders show such a strong preference for central London,” he said.

“Lenders also remain reluctant to lend at small ticket sizes, which raises questions about how smaller regional projects can access the finance they need to succeed.”