New lending to commercial property increased by over fifty per cent and reached a six-year high in 2014, as non-traditional lenders entered the commercial real estate (CRE) market at record levels.
The value of commercial property loan originations soared to £45.2 billion at year-end 2014, the highest figure since new lending reached £49.82 billion in 2008, according to the independently compiled De Montfort Commercial Property Lending Report.
The most comprehensive study of the UK’s commercial property lending market showed that the total value of outstanding debt declined to £165.2 billion at year-end 2014, excluding loans of approximately £16.1 billion secured by social housing.
At year-end 2014, insurance companies and other non-bank lenders accounted for 25% of new loan originations. Outstanding debt also saw increased diversity, with insurance companies representing 12.7% of the total debt, up from 10.2% last year, and other non-bank lenders representing 6.5%, almost doubling their 2013 share of 3.7%.
The value of distressed loans more than halved in 2014, falling from £44.7 billion at year end 2013 to £21.1 billion at year-end 2014, supported by a strong recovery in the underlying property market as well as an improving UK economy more generally.
Greater market diversification is further evidenced by the share of outstanding debt held by the top 12 lenders, which stood at 66% of outstanding debt in 2014 compared to 72% in 2013.
Lending intentions remained strong, with 82% lenders intending to increase their loan book size and 84% intending to increase loan originations.
Melanie Leech, chief executive of the British Property Federation, said, “The increasing diversification of lenders has been marked over the past year, and we feel this is broadly positive for the market.”