European CRE funding gap down 42% as non-banks take over – DTZ

Property Investor Europe News
European CRE funding gap down 42% as non-banks take over – DTZ

06 June 2013, 06:24 AM

Europe’s net debt funding gap for commercial real estate in 2013-2014 has fallen by 42% to $50bn over the past six months due to continued bank de-leveraging and strongly growing non-bank lending, says realtor DTZ.

http://www.pie-mag.com/articles/5503/european-cre-funding-gap-down-42-as-non-banks-take-over-dtz/

In some core markets such as the UK, France, Germany and Sweden, DTZ even foresees a surplus of lending capacity for 2013-2014. “This is a remarkable reversal from the significant gaps noted in previous analyses,” the realtor says in a report released today. De-leveraging under way in many major European markets is reducing the refinancing burden, reflecting progress in shrinking banks’ balance sheets in Germany, the UK, Italy, Spain and the Netherlands. Loan pricing in core European markets is set to change in the medium-term and non-bank lenders to move into non-core markets to safeguard margins.

Europe continues as the most problematic region, with a gross debt funding gap of $163bn, also down 14% on November. The gross gap is at $22bn in Asia Pacific, which DTZ expects to fall to a net of $5bn, while it sees no funding gap for the Americas. Over the medium term, DTZ said the refinancing burden may grow further, reflecting recent loan extensions and limited growth in capital values. In more exposed markets such as Ireland and Spain, which is only just establishing its bad bank, DTZ sees a greater tail risk.

“In response to the crisis in Europe’s CRE debt markets we continue to see growing activity and interest from non-bank sources,” said Head of Strategy Research Nigel Almond. “In core European markets including the UK, France, Sweden and Germany we see a surplus funding gap emerging over the next two years as new lending capacity more than covers the gross gap. In Spain we see more limited new lending capacity leaving a significant $17bn net funding gap. We also see smaller net gaps in Ireland, Italy and the Netherlands.”

Current non-bank lender capacity is only reduced over the near-term as funds take a while to raise equity. This will however be offset by continued growth in corporate bond issuance and insurance lending, said DTZ. Funds and insurers will provide $181bn of new lending capacity across Europe between 2013-2015, raising their market share to 7% from 2% over the period. The UK is expected to lead the way with the non-bank share rising to 15% from 7%. “The speed and magnitude of the growth in non-bank lending has been surprisingly strong,” said Global Head of Research Hans Vrensen. “We do see this as an important next phase in the European markets’ fundamental restructuring into a multi-channel funding model.” pie

http://www.pie-mag.com/articles/5503/european-cre-funding-gap-down-42-as-non-banks-take-over-dtz/