U.K. Office Lending Rose 48% Last Year After 2020’s Covid Crunch

(Bloomberg) -- Commercial real estate lending bounced back to pre-pandemic levels in 2021, ending more than a year of Covid-driven turbulence. 

New lending volume rose 48% year-on-year to 49.8 billion pounds ($62 billion), according to a survey of 76 major U.K. lenders by Bayes Business School. The data shows that 2021 was the strongest year in the market since 2015.

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

The first half of 2021 saw a backlog of transactions stuck in the pipeline from 2020 being resolved, prompting a flying start to the year for lenders. In the second half, lenders witnessed a flurry of new acquisition financing for existing and new customers.

Margins for prime office loans rose by 25 basis points over the 12 months, as central London reemerged as a hotspot for speculative office projects. But pricing dropped for other asset classes including prime retail and industrial properties, which saw the pricing gap narrow by between 15 and 25 basis points.

“In 2020 we witnessed a perfect storm created by the effects of Brexit and then Covid, which led to the reluctance of many lenders to put new money into the market,” said Adrian Rowland, director at property agency Colliers International Group Inc. “This is now hopefully well behind us.”

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