Commercial real estate debt increased by €23bn (£17.5bn) to €978bn over the course of 2014, according to CBRE Capital Advisors’ latest analysis of the European debt market.
The report said that despite the increase in new funding, levels were still less than half that achieved in 2007, before the financial crisis.
Drivers behind the growth include the increasing size of the market, with the total value of investment transactions across Europe increasing by 29% to top €216bn, and a shift in the types of transaction being undertaken.
CBRE said that over the past year there had been an increase in activity by higher-risk investors, which have traditionally made greater use of leverage to increase buying power and to enhance potential returns.
Despite new lending being on the up, CBRE’s analysis shows that 55% of the total existing European debt stock is dominated by refinanced or rolled-over loans made before the onset of the global financial crisis. The firm said that as a result of this average loan lengths had increased marginally over the past year but that it believed that more than half would mature by the end of 2017, reflecting some €542bn of debt.
The increase in lending has not slowed the banks’ deleveraging progress, however, with CBRE reporting a surge in activity in 2014.
It reported a 133% increase in real estate loan sales, with €49.2bn of property debt being traded during the period. This compares with €21.1bn in 2013 and just €9.1bn in 2012.
The majority of debt sold during the year was bought by US-based private equity funds, accounting for 81% of all transactions. They dominated large sales, too, with all 22 transactions of more than €500m involving private equity. Property investment companies accounted for 10% of total debt sales.
