CB Richard Ellis says that banks have withdrawn from real estate lending
Finance for new European construction became more difficult to secure during the first quarter of 2011 and lenders will continue to be “highly selective” in their investments, according to a new report by property agent CB Richard Ellis.
“European lending terms tightened further in Q1 2011,” the report said, adding that a feared interest rate rise by the European Central Bank meant that many lenders “became even more cautious in early Spring.”
The news will come as a blow to developers looking to build properties in central London (such as the Shard) where a shortage of prime office space is expected in 2012-13.
Although commercial real estate investment is up year on year, it fell compared to the fourth quarter of 2010, the report said.
“Direct European commercial real estate investment reached €28bn in Q1 2011 – a 32% increase on the same period last year.
“The latest results, whilst lower than the €38.6bn transacted in Q4 2010, are in-line with the continuing increase in activity that started in late 2009 and was maintained through 2010,” it stated.
Natale Giostra, head of UK & EMEA debt advisory at CBRE, said: “Lenders remain highly selective in choosing the assets they will provide financing for, with a focus on core properties.”
“New debt providers continue to emerge and are gradually establishing themselves in the market; however it will be some time before they establish a significant presence and provide a true substitute for the banks that have withdrawn from real estate lending.”