UK banks return to commercial property

Move pares lending margins by up to 2 percentage points

Published Mon, Nov 4, 2013 · 10:00 PM
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[LONDON] Private-equity firms, pension funds and insurers face dwindling returns on loans to the UK commercial property market as competition intensifies from banks that shunned the business after the financial crisis.

A new lender has entered the market almost every week in the past year in search of higher returns as gilt yields neared record lows, according to brokers Savills. The UK banking industry avoided the market following the collapse of Lehman Brothers in September 2008 because of regulatory requirements to meet stricter capital rules.

Greater competition on commercial property loans has narrowed lending margins by as much as two percentage points in the past year, said Anthony Myers, a real estate executive at Blackstone Group. With UK commercial property values rising for the first time since 2011 and balance sheets on the mend, British banks are increasingly willing to offer loans backing offices, stores, and industrial properties.

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