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Insight

Monopoly – Pass Go and Collect £200

Many of us will have grown up playing the Monopoly property trading board game, the traditional UK version being London centric, enhancing the aspirations of players to acquire high end property in the posh West End and City districts.

Many of us will have grown up playing the Monopoly property trading board game, the traditional UK version being London centric, enhancing the aspirations of players to acquire high end property in the posh West End and City districts.

The game appears to reflect reality, as the renowned commercial real estate lending market De Montford survey, launched last week, appears to show, with c50% of the £164 billion UK real estate commercial debt pile secured against London property.

The report also stated that CRE lending was down 17% on the previous year, with 61% of the lending activity being refinancings, a large factor in the relative increase in the loan books of the UK banks.

Numerous other facts and conclusions have been drawn from the report, on which other commentators, such as EG, CoStar, Real Estate Capital and others are better placed to comment.

But does the report capture properly the increasing importance of the debt funds and alternative lenders, including peer to peers?  We see an increasing deal volume from such lenders, with new debt providers still forming, and existing well-known names successfully launching new funds.  The development finance market is increasingly being provided by such players, who can promise quick decisions and execution.  Given the fragmented market, it is likely that many of these new providers have not contributed to the report.

But what of the market outside London and the South East?  Obviously, commercial property prices are lower in the regions, and therefore, unless packaged as part of a large portfolio, deal sizes will be smaller, so for the regional market to grow, commoditised loan products will be required, to keep deal costs down.

We predicted this some time ago and now offer alternative solutions for loan execution in the regions, working with our colleagues in Manchester and Birmingham to deliver alternative pricing and execution solutions. 

With Brexit round the corner, it is important to be able to deliver a UK solution to lending.  We are hopeful that next year, which is predicted to be a borrower's market (more lending supply than borrower need), that some regional balance will be restored.

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