UK Commercial Property Lenders Return But Lack Of Good Buildings

Banks have increased their appetite to lend to U.K.'s commercial property sector but they are constrained by the lack of good quality buildings they can invest in, real estate advisor Savills PLC (SVS.LN) said Tuesday.

The company said that 21 lenders are willing to provide more than GBP30 million for a transaction of U.K. commercial property but that scarcity of good quality lending opportunities is holding back lenders from realizing their ambitions.

Over the past year, fewer commercial investment properties have come to the market and in many cases the better quality investments have been purchased by cash buyers, often from overseas at premium prices, sparking a rise in the value of commercial property in the U.K.

"One consequence of this is that for better quality property investments, loan to values have increased and interest rate margins have decreased as lenders compete with each other for business," said Savills.

Savills has increased its definition of biggerticket lending to GBP30 million from GBP20 million it reported in October and said that 60% of current lenders are German.

The company also said that the provision of development finance has re-emerged into the market with Barclays PLC (BARC.LN) and Barclays Wealth, Close Brothers Group PLC (CBG.LN), Eurohypo AG (EHY-XE), HSBC Holdings PLC (HSBA.LN) and HSBC Private Bank, Investec Holdings Ltd. (OD-INH), Lloyds Banking Group (LLOY.LN), Royal Bank of Scotland Group PLC (RBS), National Westminster Bank PLC (NWBD.LN), Coutts Holdings PLC (CTH.LN), willing to provide site acquisition finance and in some cases construction finance.

Savills U.K. head of valuation William Newsom said "I am very pleasantly surprised by the number of lenders who are prepared to provide development finance, mostly for residential schemes."

"In the late 1990s the development finance markets were closed for half a dozen years. In this cycle we have seen the markets reopen again after only two years albeit on cautious terms."

The 21 lenders comprise of Aareal Bank AG (ARL.XE), Aviva PLC (AV.LN), Bank of London and Middle East, Barclays, Bayerische Landesbank, Canada Life, Deka Bank, Deutsche Bank AG (DB), Deutsche Pfandbriefbank, Deutsche Postbank AG (DPB.XE), Deutsche Genossenschafts Hypothekenbank AG (GD-DGH), Eurohypo AG, Helaba, ING Real Estate Finance, Landesbank Baden-Wurttemberg, Landesbank Berlin Holding AG (BEB2.XE), Lloyds Banking Group, Nord LB, Deutsche Hypothekenbank, RBS, Santander Bancorp (SBP), Westdeutsche Immobilienbank.

-By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; anita.likus@dowjones.com

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