Future Living 3 - Living is as safe as houses
2023 Future Living report
10 min read
The Bayes Commercial Real Estate Lending Report, recently published, provided plenty of food for thought. Whilst overall lending volumes have unsurprisingly fallen, two things stood out. Firstly, debt funds are experiencing a higher default rate than bank lenders, which is the inevitable result of their keenness to lend at higher Loan to Values, overextending themselves to meet demand from borrowers seeking outsized returns.
More encouragingly, whilst it is getting harder to write bigger ticket loans, there is still a large amount of liquidity for loans between £20 million and £100 million.
We can attest to this. Yes, we face the same challenges as the rest of the market, with further repricing to come and dampened investor sentiment caused by ongoing concerns over how long the higher inflation and higher interest rate environment will persist. However, we continue to get money out the door, underwriting schemes in our high conviction sectors to high quality sponsors.
Notable transactions in the most recent quarter include a £122 million loan to LCN Partners for the development of the Unilever headquarters in Kingston, and an £80 million loan for the development of a highly sustainable, key distribution centre in Suffolk, which will be occupied by The Range. The former, which represented the largest office development loan in Outer London in 2023, saw us arrange part of the loan with two global banks.
This month also saw the launch of our third Future Living Report. An overview of the findings are provided below, but the key takeaway is that global institutional appetite for exposure to the UK Living sector is on the rise at the expense of other commercial real estate sectors.
Whilst investors are also predicting that access to finance will be harder over the next 12 months, I believe that for the right schemes and sponsors, pricing will remain extremely competitive.
Following a number of years in which the real estate sector has, perhaps understandably, not featured high up on the UK political agenda, it enjoyed a boost this month following the Labour and Conservative party conferences. With an election coming up next year, both parties see housing (and by extension the planning system), as a key battleground. This can only be good news for the industry.