10 Years on From the Global Financial Crisis, UK Commercial Property Debt Market is in Good Shape


10 Years on From the Global Financial Crisis, UK Commercial Property Debt Market is in Good Shape

24 Jun 2018

The most comprehensive study of the UK’s commercial property lending market shows that a substantial amount of new lending was agreed during the second half of 2017.

According to the Cass UK Commercial Real Estate Lending Report, there was a higher than usual amount of £34.5bn of undrawn funding, which has been agreed during 2017 and is largely linked with development funding.

Non-bank lenders were the most active group. They increased their market share of new origination to 14% from 10% a year earlier. This is mainly due to the expanding universe of non-bank lenders joining the survey or launching new debt funds. In total, they wrote £6bn of new loans of which 60% was sourced from insurance and pension funds.

Key takeaways –

  • Increase in agreed development finance (13% y-o-y) and undrawn loan commitments (29.7% y-o-y)
  • Alternative lenders (insurance companies and other non-bank lenders provided nearly a quarter of new lending in 2017 (24%)

Development lending has reached a new peak with £22bn of loan books in development finance, of which £8.7bn was new funding. The majority is allocated to residential development finance.

Average LTV ratios remain low and 78% of the total outstanding loan book is held in loans with LTV ratios below 60%.


Tim Crossley-Smith, National Head of Valuation Consultancy, GVA added:

“10 years on from the Global Financial Crisis, the UK commercial property debt market looks to be in good shape with 78% of loan exposure held in loans with an LTV ratio of less than 60%, and loans in default continuing to reduce. With 73% of all outstanding debt due to be repaid in the next five years, interest rate rises and structural changes to some sectors could pose a threat, but the survey highlights the increasingly diverse range of funding sources.”

The Cass UK Commercial Real Estate Lending Report (December 2017) is available on the Cass website.


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