Office And Retail Lending Bounces Back In Q1, But Beds Still Dominate

Requests for new debt relating to office and retail acquisitions and refurbishments increased sharply in the first quarter of 2022 — but residential deals still dominate the European debt market. 

FinLoop, the proptech platform providing services for real estate borrowers, lenders and brokers, said more than 48% of the €1.4B (£1.2B) lending requests and agreements submitted via the platform in Q1 were for residential properties and projects, including student and senior living accommodation.

“When you add the loans requested for hotels to the data on residential, the number of loan requests is even higher and confirms the immense appetite for living accommodation assets,” FinLoop chief executive Thomas Schneider said.

Despite a significantly lower number of loan applications compared to residential, the monetary value of requests submitted for office and retail assets via FinLoop saw an increase in Q1 compared to the previous quarter.

The figures showed that the value of requests relating to retail assets increased by 14.3 percentage points to 18.9% of the total volume recorded; for office assets the figure for deal volume reached 21.7% in Q1, compared to 14.5% in Q4.

Many assets are developments requiring capital expenditure, perhaps with an eye on improving sustainability, Schneider said. 

Indeed, FinLoop said that lenders are paying increasing attention to the sustainability criteria of the assets they lend against, and they are becoming more likely to reject loan applications for deals that don’t meet their standards. 

“What became apparent is that finance requests for real estate projects made via FinLoop were increasingly being rejected by lenders due to concerns about ESG issues,” FinLoop co-founder Nicole Lux said.

“The filtering of loan requests against ESG criteria has continued and is a progressive influence upon the market activity, and borrowers who ignore the new paradigm will potentially miss out on finance opportunities and could face higher borrowing costs.”