UK market for syndicated real estate loans slumps

The volume of syndicated commercial property loans in the UK more than halved in the first half of 2017.

Loan volumes slumped from €7bn (£6.4bn) in the same period last year to just €3bn, according to data published by Dealogic with the support of the Commercial Real Estate Finance Council (CREFC) Europe.

The fall resulted in the UK being replaced by France as the largest national market in Europe, the Middle East and Africa (EMEA) for syndicated real estate loans, which allow lenders to pool balance sheet capacity to participate jointly in large loans.

“The UK’s decline is striking but unsurprising given its advanced property cycle, slowing economy and political uncertainty,” said Peter Cosmetatos, chief executive of CREFC Europe.

“While the Brexit effect has shaken Britain, the rise of the French market is also noteworthy. It remains to be seen whether the French cycle is reaching its peak, or whether renewed optimism under president [Emmanuel] Macron will give it a new lease of life,” he said.

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The sharp slowdown in UK activity comes despite volumes in the investment market edging up in the first half by 4% on the same period last year to £25.1bn, according to data from Lambert Smith Hampton. One of the reasons for this seeming disparity may be the large number of Far Eastern buyers in the investment market.

“While confidence in the UK has held up well despite political volatility, the falling pound has seen an increasing number of Far Eastern investors enter the market who either use their own banks or buy with equity. This could go some way to explaining the huge dip in UK volumes,” said Philip Abbott, partner at law firm Fieldfisher.

Wells Fargo topped the UK syndicated real estate finance loans league table for mandate lead arranger in the first half of the year, with a total of three deals worth €520m.

The Dealogic data also showed that market activity across EMEA had fallen by 25% year on year. First-half volumes totalled €16.5bn - the lowest first-half total since 2013.

The most active banks during the period included LBBW, ING and Natixis.

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