An appetite for commercial property seems to be on the rise across Europe, after banks revealed that they are working on three major commercial mortgage deals.
One such aspect that seems to be alleviating is CMBS, which has only cemented a few deals since 2008. Investors across Europe and the US are currently following assets that not only offer high yields but have performed well in the past five years.
It has emerged that the default rate on loans across Europe, especially in the UK and Germany, are very low. Two of the new deals are ‘German multi-family’ forms which allow commercial landlords to rent out a big portfolio of residential sites. One such property group is Gagfah, which has a £1.7 billion CMBS growing in August 2013, whilst having also managed to gain a billion-pound loan from Bank of America Merrill Lynch.
According to the Financial Times, Mark Nichol, research analyst at Merrill Lynch, said: “The availability of financing for commercial property has declined and loan margins have increased since the financial crisis began, as a number of bank lenders that were previously active have since curtailed or restricted lending to commercial property in response to higher regulatory costs and a desire to reduce exposure to the sector.
“This has opened the door for new lenders to emerge and CMBS to return. Spreads on German multi-family CMBS notes have reached levels that are now competitive with bank loan margins for similar leverage.”
The UK has also seen Deutsche Bank establish a £400 million CMBS for Chiswick Park complex in west London; a development which was actually part-funded by a CMBS back in 2011.
However, it is not all good news. It has been estimated that nearly 60 per cent of CMBS loans in Europe will not repay this year, whilst the next five years will see losses of up to £10 billion.