Banks are putting the brakes on UK commercial real estate lending as the pandemic slows the economy and stokes fears about looming defaults by landlords.
New loans declined in the first half by 34% from a year earlier to £15.5bn, according to a report from The Business School in the City of London. More than a fifth of lenders surveyed said they made no new commercial property loans in the period.
“The short-term effects of the coronavirus pandemic have only just become visible, but the long-term effects will impact lending and banking into next year and beyond,” Nicole Lux, senior research fellow at The Business School and author of the report, said in a statement.
Many lenders have extended loans or provided short-term refinancing to struggling borrowers, according to the Business School report. That could change in the fourth quarter, when enforcement actions could begin for some property types such as retail, shopping centres and hotels.
The amount lenders were prepared to offer against the best retail outlets averaged just over half of the value of the properties, the lowest level ever recorded by the research.