UK office lending up 48% last year after 2020 Covid Crunch

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(Bloomberg) – Commercial real estate lending rebounded to pre-pandemic levels in 2021, ending more than a year of Covid-induced turmoil.

The volume of new loans rose 48% year-on-year to 49.8 billion pounds ($62 billion), according to a survey of 76 major UK lenders by Bayes Business School. Data shows that 2021 was the strongest year for the market since 2015.

“The 2021 report really shows how well prepared lenders were to weather the Covid storm,” said Neil Odom-Haslett, president of the Association of Property Lenders.

The first half of 2021 saw the resolution of a backlog of deals stuck in the pipeline from 2020, causing a stellar start to the year for lenders. In the second half of the year, lenders saw a flurry of new acquisition financing for existing and new customers.

Spreads on prime office lending increased by 25 basis points over the 12 months as central London once again became a hot spot for speculative office projects. But prices fell for other asset classes, including prime commercial and industrial properties, which saw the price differential narrow by 15 to 25 basis points.

“In 2020, we saw a perfect storm created by the effects of Brexit and then Covid, which led to many lenders being reluctant to invest fresh money in the market,” said Adrian Rowland, director of the he Colliers International Group Inc. real estate agency is now hopefully well behind us.

©2022 Bloomberg LP

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