Lending activity across Europe is expected to increase in 2024, according to the latest CBRE Lender Intentions Survey.
The 2024 European Lender Intentions Survey conducted by CBRE gathered responses from 130 Europe-based participants, asking about their anticipated activities, lending terms and criteria, and preferred strategies for 2024.
The findings indicate a robust resilience within the debt markets. An uptick in lending activity across Europe is predicted for 2024, with approximately two-thirds of surveyed lenders planning to increase their activity, primarily through refinancing. Non-traditional lenders like debt funds, insurance firms, and investment banks foresee a modestly higher activity level (76%) than their traditional counterparts (56%).
Figure 1: Are lenders expecting to increase their activity in 2024 relative to 2023?
Jørgen Arnesen, Head of Investment Banking Nordics at CBRE, notes that continued moderate investment activity levels, uncertainty surrounding property values, and the likelihood of sustained higher policy interest rates remain the primary challenges for the debt market. However, we are seeing increased activity on both the investment and lending sides, including new international lenders taking advantage of the current market and entering the Nordic markets for the first time. Most of the activity on the debt side is related to refinancing existing loans, but we are also seeing some activity for development loans for high-quality sponsors and projects.
Preferred sectors: Industrial and Multifamily
The survey reveals that the preferred sectors for lenders are Industrial and Multifamily, both chosen by 34% of respondents as the top sector. There is a positive shift in sentiment across all major sectors except the Office sector, which continues to face challenges. However, there is a significant increase in interest in the Hotel sector. A noteworthy 83% of surveyed lenders expressed willingness to lend to 'alternative sectors', with the Living sub-sectors and Life Sciences emerging as the most favored.
Higher LTV against prime assets
In the context of Senior Loans on prime assets in the Office, Retail, and Hotel sectors, the majority of lenders stated preparedness to loan at a Loan-To-Value (LTV) ratio of 50-60%, with a slight increase for prime Industrial assets at 55-60% LTV.
For Multifamily and Purpose-Built Student Accommodation (PBSA) assets, this figure rose further, exceeding 60% LTV. The survey also revealed variance in the margins quoted by respondents, with lower margins for the preferred sectors of Industrial and Multifamily and higher ones for Retail and Hotels.
Sustainability has become a crucial component of lenders' underwriting strategies. Approximately 70% of surveyed lenders are offering, or soon planning to implement, a margin step-down for loans against assets with strong ESG credentials, predominantly in the range of 5-20bps.
Concluding the survey, Lars Haugen, responsible for CBRE Research Norway, stated: "The insights from our Lender Intentions Survey present a promising outlook for the Real Estate market. The majority of lenders are increasing their activities and reporting enhanced credit appetite in most sectors. Despite the challenges faced by the office sector in Europe, the Nordic office market remains resilient. The lending market continues to be an essential part of the expected uptick in investment activity, which we have already started to see in some of the Nordic markets.”
Learn more
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or contact
Jørgen E. Arnesen
Head of Investment Banking, Nordics
jorgen.arnesen@cbre.com
