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Growing appetite from lenders to finance commercial property deals according to Q1 2013 Bank of England data

Birmingham debt market constrained by lack good quality stock

Birmingham, 3 May April 2013 – Appetite from lenders to finance commercial property deals in Birmingham is increasing with the main high street banks as well as some more specialised lenders aiming to lend more this year than at any time in the current property cycle according to property agents Jones Lang LaSalle.

This trend, says Peter Clarke, head of Jones Lang LaSalle’s Valuation Advisory team in Birmingham, is supported by the recent Q1 2013 data published by the Bank of England.  According to its quarterly lending figures UK bank exposure to real estate (the proportion of lending to property as a percentage of total lending) remained stable in the first quarter at 8.2 per cent of all debt.

Commenting on the recent Q1 figures Peter Clarke said: “In spite of continued deleveraging by UK banks the recent data shows that commercial property lending has remained broadly flat as a result of growing appetite from lenders to finance prime real estate.”

Some lenders are taking advantage of the Funding for Lending scheme which allows banks to offer more favourable rates of interest, or reduce their arrangement fees thereby removing a major ‘hurdle’  to investment.  This scheme has been extended for a further 12 months, and according to Jones Lang LaSalle, may help further underpin the market recovery,

Peter continued: “The debt market continues to show signs of improvement, with an increasing number of lenders seeking to lend, albeit on a relatively narrow range of opportunities. It is however now being constrained by a lack of investment transactions, as opposed to earlier in the current cycle, when the opposite was true.

In Birmingham there have been a number of prime office asset sales where investor interest has been strong such as 1 Colmore Row and 84 Colmore Row which is currently being marketed by Jones Lang LaSalle.  However the market would undoubtedly benefit from a greater volume of commercial properties for sale: if there was more good quality stock this would give rise to more commercial property transactions and subsequently increase lending further. 

“What is perhaps holding back the debt market is the unwillingness from some owners to consider a sale unless they are forced; there is a perception that values will improve and a better return could potentially be realised.
Peter concluded: “Some secondary stock, which the majority of banks are unwilling to lend on, are also in demand by property investors albeit at discounted values.  This is a result of the weight of money seeking a home where an attractive annual return can be obtained.”​