Commercial property loans showing signs of improvement as rents rise

LOANS to commercial property firms rose by £727m in the last quarter, the first quarterly increase in a year, figures released yesterday showed.

The rise contrasts with a £3.2bn overall drop in lending to UK businesses in the last three months, according to Bank of England statistics obtained by NB Real Estate.

Loan-to-value ratios are also creeping up towards 70 per cent on commercial property loans from a low of 50 per cent last year, an indication of a more relaxed lending landscape.

Paul Watling, director of valuation at NB Real Estate, said: “As capital values and rents have started to recover, so banks have shown a greater willingness to recommence lending to the commercial property sector.

“However, the lending environment is still incredibly tight with the emphasis on prime stock and security of income.”

The amount of bank debt carried by the property sector has fallen by £2.4bn over the last year, to £251.3bn.

“Whether you believe that lending to real estate has turned the corner is likely to depend on what you are dealing with,” said Watling.