Finance
There is general agreement that, in the short term, financing is getting harder – with 70% of UK real estate professionals believing it will become more difficult to access debt over the next 12 months.
How hard will it be to access debt this year?
As the bar chart on the right shows, the most widely anticipated impacts of a restriction in the flow of debt are forced sales of property (60%), injections of additional equity, (53%) and a growth in the number of owners in distress (48%).
What are the likely consequences of current refinancing in real estate, as a result of debt issues?
Even where debt is available, businesses may struggle to find it on acceptable terms. In the current environment, the cost of borrowing will be a problem for a growing number of real estate players. Investors who enjoy access to capital at favourable rates are likely to have a significant advantage, just as they have in similar markets in the past.
When is your next significant refinancing? (UK investors and developers)
The current climate may also prove to be a fertile one for non-traditional lenders. As CMS real estate finance partner Rob Whiddett says: “The continuing uncertainty in the sector could lead to a higher cost of capital for the traditional bank lenders, which would increase margins and – when added to a lower risk appetite – may provide an opportunity for alternative lenders. We have also noticed that alternative lenders’ speed of execution gives them an advantage over banks in certain circumstances.”
A decade ago our research highlighted the growth and diversification of non-bank lending in the aftermath of the Global Financial Crisis. Some sources suggest that it now accounts for over a quarter of the UK’s commercial real estate debt market. There is every indication that it will grow still further over the next few years.
