The Barometer aggregates financing requests for commercial mortgages received each quarter, and provides an early indicator of change in borrower sentiment, patterns of investment and future lending activity. It is a complementary study to the latest De Montfort University Commercial Property Lending Report, which is also presented this week, surveying retrospective UK lending activity.
Laxfield’s Barometer shows improving confidence in the UK commercial property market, as evidenced by:
- A continued gradual increase in average loan-to-value ratios, which stand at 58% for the last two quarters, compared to 51.8% in the first three quarters of 2013. The market is still showing a fairly constrained approach to leverage overall, but an increasing number of investors seek LTVs in excess of 65%
- More smaller-ticket loan requests, principally as a result of increasing activity in the regions. 47.2% of requests received in Q4 2013 and Q1 2014 were for sub-£50m loans.
- A higher proportion of acquisition-related loan requests, as opposed to debt refinancings. This reflects an active investment market that is moving on from legacy debt issues. By loan count, more than two thirds of new requests were acquisition related in Q4 2013 and Q1 2014.
- Substantial increase in demand for debt secured on retail assets, which accounted for 31.6% by loan size in the last two quarters compared to 22% in the first three quarters of 2013.
Commenting on the findings of the Barometer, Emma Huepfl, co-founder and head of capital management at Laxfield, said:
“The Barometer paints a picture of a recovering commercial property market where confidence is improving. LTV ratios are creeping up but remain well below pre-2008 levels, and the increase in smaller ticket loan requests highlights increasing activity in the regions and a broadening of investor interest beyond prime, core assets. In particular, a growing number of loan requests related to retail assets suggests an improvement in this sector.”
Laxfield Capital’s UK CRE Debt Barometer can be downloaded from the Laxfield Capital website at www.laxfieldcapital.com.