Midlands lenders ready to invest in commercial property
The availability of debt will be a crucial factor for commercial property markets across Europe this year, and a recent major PricewaterhouseCoopers report shows that most lenders expect financing to become even harder to obtain in 2012 than it was in 2011. However, the situation looks somewhat brighter in the Midlands, where a higher proportion of lenders appear ready to invest.
The Birmingham Post quotes PwC’s Midlands-based property expert Alistair Reason ahead of an industry event at PwC this Thursday as saying that “while access to finance for commercial property development remains a concern, there are some key examples of excellent investment opportunities coming to market as lenders seek to offload some of their stock or package some of it as investment portfolios.”
“The Midlands has seen some good examples of this last year and we are hopeful that more investment opportunities will be coming to market this year,” he added.
The Emerging Trends in Real Estate Europe 2012 report from PwC and the Urban Land Institute says investors are selecting their preferred commercial property markets “more on their potential as safe havens than high-growth hubs”. Specialised non-core investments such as solar energy parks, gas storage facilities, healthcare properties and data centres are gaining attention as alternatives to more traditional property types, the report finds.
The main story for 2012 will be debt, the report says. Prospects depend on banks’ willingness to make commercial loans. It predicts that financing “will become a major casualty of the measures banks take to tackle regulatory and macro-economic pressures; deleveraging will not free up capital for fresh property lending; debt will become more short-term and expensive; and the need to find alternative sources of funding will become imperative”.
Only 6% of lenders in the report expect debt availability on a par with 2011 while 42% expect debt to be moderately less available and 52% think it will be substantially less. PwC points out that there may, however, be opportunities for equity investors who are less reliant on debt, for investors who can take advantage of the opportunities from bank deleveraging, and for new debt providers entering the market.
The report’s recommendations for short-term non-core property investment strategies include
- Buildings in need of refurbishment on the edges of prime districts in major cities;
- Budget hotels, especially in London’s Waterloo, Paddington, King’s Cross or Bishopsgate areas (survey respondents recommended buying secondary office space and converting it to mainstream lodging);
- Mezzanine financing for residential developers; and
- Homes in London that could be resold to wealthy individuals from Greece and Italy seeking to own a home in a country that, while in a downturn, remains more economically stable than those two countries.
