- FAP Barometer climbs by around 65 basis points during Q3 2014 to +2.48
barometer points, thereby achieving the highest level since Q4 2012
- New business buoyant - niche segments gain in significance
- Existing-property margins keep softening as project development margins harden
Sentiment among lenders on
"The reasons for the bright mood continues to include the favourable interest environment, which seems to have seriously boosted demand, and the robust business cycle which makes German real estate portfolios attractive even for foreign investors," said
The polled experts continue to perceive the parameters of the financing market as highly favourable. The number of interviewees who thought the terms of financing are more progressive than in the previous quarter has gone up slightly this quarter: For the first time, more than 60 percent rated conditions as more progressive than the previous quarter. None of the survey respondents reported a more restrictive market situation. Nearly 40 percent rated the terms of financing as unchanged.
New Business Buoyant - Niche Segments Gain in Significance
The upbeat sentiment among the respondents was reflected in the lenders' assessment of their new business: Almost 30 percent described the development of their new business as a "continued increase," nearly doubling the score quarter on quarter (Q2 2014: 15 percent). Another 18 percent reported a "recent increase" in new business (previous quarter: 21.7 percent). 38 percent expect their new business to stagnate (previous quarter: 46 percent). A mere 15.6 percent reported a recent or continued decline in new business (previous quarter: 17.4 percent).
Among the property types now financed, niche segments have kept moving into focus for investors. The segment "other property types" which includes inter alia, entertainment or wellness properties, made a substantial gain of 10.3 percentage points in importance (10.3 pp), thus outpacing "micro-apartments" as well as "social property" and "hotel property." In the project development context, logistics properties gained 2.6 percentage points whereas the hotel segment lost 2.7 percentage points.
Existing-Property Margins Keep Softening as Project Development Margins Harden
The LTV spread in portfolio financing ranges from 30 to 110 percent while the benchmark ratio across financing types and property types is 71 percent, unchanged quarter on quarter. The spreads extend from 60 to 450 basis points, the median equalling 167 after another decline (previous quarter: 181). In project development financing, the LTC bandwidth extends from 60 to 90 percent. The benchmark was once more 73 percent. Spreads went as high as 301 basis points during the third quarter (Q2 2014: 325 bp). At 129 basis points, the focus in the lower segment has slightly ascended from the previous quarter's score (123 bp), while the level in the mid-segment also made modest gains, rising from 198 to 205 basis points.
Demand for alternative lenders, which had most recently surged, hardened, and shows a score of 38.3 percent in the poll for the third quarter (QoQ: 38.1 percent, Q1 2014: 28.85 percent).
Questions concerning the possible reasons for the improved loan supply draw a divided response from the panel: 50 percent of the respondents consider the low-level interest environment as the main cause for the positive change in lending. 41.1 percent link the high demand with the robust economic situation in
At more than 85 percent, the vast majority of the panel experts assume that the expanded loan supply will encourage higher financing ratios in the short and medium term. In the opinion of most panel experts (70 percent), alternative lenders will continue to play a significant role going forward. No less than 40 percent of the lenders find it a potentially interesting proposition to obtain subordinated funds for highly geared financing arrangements (e. g. LTVs of 80 or indeed 85 percent) directly, in order to offer their clients highly leveraged financing without having to commit equity capital of their own.
The Q3 2014 Quarterly Report for the FAP Barometer including press release and charts is available as download at: http://www.fap-finance.com/de/barometer.aspx
Methodology of the "FAP Barometer for Commercial Real Estate Financing"
Starting with Q3 2012, the FAP Barometer has been published on a quarterly basis. The survey conducted for the Barometer's latest issue involved 187 experts, the majority of which are directly responsible for granting commercial real estate loans. The lenders polled cover around 90 percent of the loan volume approved in commercial real estate financing in
About Flatow AdvisoryPartners (FAP)
- FAP Barometer climbs by around 65 basis points during Q3 2014 to +2.48 barometer points, thereby achieving the highest level since Q4 2012 - New business buoyant - niche segments gain in significance - Existing-property margins keep softening as project development margins harden