Commercial real estate enticing lenders, finds CBRE

The findings come in a newly launched report from CBRE that measures lender sentiment towards commercial property following the recent period of market uncertainty.

It involved 33 local and international banks and non-bank lenders, and sought to understand their appetite to expand their commercial real estate lending, which is currently estimated to be worth $330 billion in Australia. 

It found that over one-third of lenders are looking to grow their commercial loan books across the next 12 months. 

Moreover, the number of lenders seeking commercial opportunities, particularly non-banks, doubled the amount wanting to shrink their commercial loan books. 

The results also found that nearly two-thirds of respondents were wanting to expand their industrial exposure, which is currently one of the fastest growing asset classes in Australia amid market confidence. 

Domestic banks said they saw themselves as being underweight in residential Build-to-Rent (BTR) and industrial markets, whereas non-bank lenders said they were overweight in residential-to-sell loans. 

Contrastingly, international banks viewed their portfolios as overweight in office mortgages, and were becoming more selective towards the industry.

“Non-bank lenders are helping to plug the gap, with nearly half of the non-bank lenders surveyed indicating a desire to grow their exposure to repositioning opportunities in the office sector,” commented CBRE associate director, Will Edwards. 

CBRE also noted that loans with a 40 to 60 per cent loan-to-value ratio (LVR) remain attractive to over 80 per cent of local and international banks. In comparison, non-bank lenders were more willing to accept loans above a 60 per cent LVR. 

The CBRE report also highlighted the expected increase in debt costs, with nearly 50 per cent of lenders predicting debt margins to accelerate by 20 basis points over the next financial quarter. 

This growth will place pressure on the serviceability of loans and lender’s interest cover ratio, reflecting current economic uncertainty. 

“The survey has confirmed that banks are taking the opportunity to reset pricing in line with broader economic conditions, passing on rising fund costs through increases to margins,”  Andrew McCasker, CBRE’s managing director of debt and structured finance, said.

“Despite headwinds, lenders have a continued appetite to support investors with a track record, sound assets and a clear asset strategy.”

[Related: Business credit applications fall for the 1st time in over a year]