When will commercial property lending normalise? – Knight Frank
Knight Frank recently held a briefing for bankers and asked those present when they thought the market for commercial property lending would normalise. The results were interesting – while Knight Frank had expected the majority answer to be 2015 and beyond, the most popular choice was 2013 with 39% of the vote, followed by 2014 with 34%. Only 5% thought that lending would return to normal levels next year.
Knight Frank notes in its latest update on the commercial property market that the availability of finance for commercial property has begun to shrink once more, according to the latest Bank of England Credit Conditions Survey. However, the firm says, this is a short-term view and “the world will probably be a different place by 2013”. While the market may be retrenching now, bankers appear to believe that credit will become more readily available in the medium term. Knight Frank says this may reflect the entry of new providers to the market – particularly insurers – which may have led banks to feel that they could be left on the margins if they hold back for too long.
Banks are expected to mount a strong drive to clear up their loan books over the next two years, the firm says, with implications for corporate recovery. It notes recent evidence that secondary pricing outside London is softening again but says the pain this time will be restricted to certain lower-quality stock in some areas rather than the general downturn seen in 2008.
Knight Frank cautions that there is a difference between banks’ ability to lend more from 2013, and their actual willingness to do so. “There are many factors influencing the deleveraging process that the banks cannot control. Moreover, there are still losses to be crystallised on tertiary properties whose true value can only be guessed at,” the firm notes.
