Insurance companies, debt funds, asset managers and a number of
other alternative lenders are rapidly expanding into the commercial
property sector, according to the latest research.  Mainstream
banks are still scaling back their real estate lending following
the financial crisis, enabling alternative lenders to expand their
operations in the sector.

According to data from De Montfort University, nearly a quarter
of new UK commercial property loans originate from non-bank
lenders.  Of this number, around half came from insurance
companies.

Within the past 18 months, insurance companies have been joined
by a number of other non-bank lenders, including private equity
investors, hedge fund managers and many others.  In 2013, some
11 per cent of new loans came from these lenders: an increase of
almost double on previous years.

Alternative lenders have continued to expand their activities
across European debt markets.  The number of deals they
financed increased from 18 within the first quarter of 2013 to 56
by the close of the year.  Their activity is heavily focused
on leveraged buyouts, but they have also become more regular
lenders in property debt funding, too.

Britain's banks made up just 43 per cent of the commercial
property sector's £30bn new loan originations within 2013, a
substantial decrease from 2008's figure of 72 per cent.  New
lending from banks in other countries has remained relatively
steady within the last five years. Total loans made against
commercial property fell by 9.1 per cent year-on-year to £180bn,
according to the research.

Bill Maxted, one of the academics responsible for the research,
said that Britain's lending market had changed dramatically during
the past year as a result of investors searching for yield in a low
interest rate environment.  He said:

"There are more lenders in the market and there is a real
competition, with interest rate margins falling and loan-to-value
ratios rising,"

"There are some quite aggressive terms being offered by debt
funds in particular, and a relaxation of the lending terms that are
being offered generally as a consequence of this sharp
turnaround."

This new inflow of capital has actually helped to kick-start the
commercial property market, with asset values beginning to increase
following half a decade of slump and stagnation.  Chris
Holmes, the head of UK debt at advisers JLL Corporate Finance, said
that lender balance sheets had been "materially cleansed" of the
debt hangover from the financial crisis.

Liz Peace, the chief executive of the British Property
Foundation, said:

"There has been a general feeling of improving credit
availability in the past 12 months. The banks seem to have
significantly patched up their balance sheets and problem loans are
being resolved, freeing up capital for new lending.

"Non-bank lenders are becoming a significant part of the market,
suggesting we are moving towards a more balanced provision of real
estate debt in the UK."

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