22 February 2016 – Mis Oficinas
Spain will continue to represent a very attractive market for entities wanting to lend money to the real estate sector in 2016, according to “The European Lending Trends” report published by Cushman & Wakefield, the global leader in real estate services. This conclusion has been drawn on the basis of surveys completed by 60 European lenders, who contributed €80,000 million in loans to the real estate sector in 2015.
11% of the entities that responded to the questionnaire expressed a clear interest in granting loans to (companies in) Spain over the coming months. That figure is higher than the 9% obtained in the previous report compiled by Cushman & Wakefield. This upward swing in Spain is the largest increase recorded in Europe.
Meanwhile, the survey shows that average financing conditions have also improved in Spain. In Madrid, average leverage levels are close to 59% (previously they stood at 54%), whereby surpassing those recorded in comparable cities – Milan stood at 57% and Lisbon at 50%. Similarly, average margins have reduced, but Madrid still generates returns of 185 bps, well above those recorded in the established markets of central and northern Europe. In the previous report, average margins in Madrid amounted to 210 bps.
According to Pablo Kindelán, Associate in the Capital Markets team at Cushman & Wakefield, “this report confirms a trend that is mirroring real estate investment in Spain, with significant interest from investors, record levels of activity and decreasing yields. The improvement in financing conditions highlighted in this report can only serve to facilitate investment activity”.
According to the report, average loan-to-value, LTV, ratios in Europe range between 55% and 66%, with the highest ratios recorded in Frankfurt and Paris (64%), followed by London (63%). The debt funds are willing to lend at higher LTVs than those typically granted by commercial banks and institutions, and only a few lenders want to expand through speculative developments.
In terms of margins, there are significant variations in the averages by country. In this sense, Stockholm records margins of 130 bps, Frankfurt and Paris generate margins of 140 bps, whilst Lisbon registers margins of 250 bps. Milan is the only other city (in Europe) where margins exceed 200 bps. (…).
Original story: Mis Oficinas
Translation: Carmel Drake