It has emerged that debt held against commercial property in the UK stood at £197.9 billion by the end of 2012, according to the Commercial Property Lending Market report by De Montfort University.
Whilst this may see a dramatic decline of 7.7 per cent, compared to the end of 2011, the figures from the largest property lending report in the UK highlighted that the difference between good and bad quality assets in the sector are becoming more and more polarised over time.
As debt in the market shows signs of easing since the global financial crisis of 2008, the sector is splitting into two distinguished groups. Prime property, especially sites outside of the capital and the south-east of England, is becoming more and more ignored by investors due to a lack of lending. When it comes to more favoured assets, competition seems to be severe in order to secure less risky loans.
Bill Maxted, one of the authors of the report, said: “During 2012, lending organisations reported generally that the weak UK economy and increasing incidences of tenant failures, particularly in the retail and hospitality sectors, was having a detrimental impact on borrowers’ cash flows and the capital value of commercial property.
“There was a reduction in the year-on-year number of new impaired loans but the situation with many existing problem loans were deteriorating. Lending organisations had become more inclined to sell properties securing non-performing loans with these decisions often being driven by regulatory pressure.”
The report stated that 72 per cent of this outstanding debt will need to be paid in the next five years, meaning that £143 billion will be paid by 2018. Some £45.5 billion of this figure will mature in 2013 alone.
The survey was based on 87 lending groups from 78 different banks in the UK.