European acquisition financing volumes pick up at year-end

The second half of 2024 showed slightly less financing volume, however the year ended with a 50% increase on 2023. Increased activity and regained confidence is coming from large high street & commercial banks across Europe.

3 out of 5 terms sheets provided on European financing deals
60million came from regional and high street banks in H2 2024
Development & mezzanine finance are still the hardest to find for borrowers
The UK has been the most buoyant lending market in Europe in H2 2024, giving borrowers plenty of debt availability from all types of lenders

H2 2024 European debt market improvements

Despite the slow market investment activity across Europe in 2024, the 2024 financing market ended with a positive final quarter in Q4 2024. On a year-on-year basis financing volumes were up by 50% from 2023.

While 2023 was dominated by refinancing activity, acquisition financing has returned to be the strongest market driver in 2024 with approx 49%. The market was supported by continued development finance activity which accounted for 29% and 22% for refinancing. Development finance was concentrated in residential and student housing asset classes during the second half of 2024, with borrowers seeking senior LTC levels of 70 – 80%. For investment acquisitions, borrowers were looking for 60 – 75% LTV financing, while mezzanine debt is set from 70 – 90% LTV.

Lenders are still most keen on lending to office, residential and logistics assets. While over 80% provide investment financing, 73% of alternative lenders provide development finance and 80% of banks.

In Germany, borrowers are still struggling to finance development assets or finding mezzanine finance, including for residential property. For a residential investment asset on the other hand a borrower can expect on average 6 – 9 terms sheets from lenders, of which 3 out of 5 were regional, local banks in H2 2024.

The UK market was the most active for financing commercial investment assets, such as office or logistics, for which borrowers could expect to receive terms from 10 – 13 lenders, including all leading high street banks, challenger banks and alternative lenders. In France, Spain and the Netherlands, the major lending activity came from the large commercial and high street banks, such as Santander, ING, SocGen, BBVA as well as larger alternative lending platforms operating throughout Europe.

There is good debt availability throughout all asset types. While the majority of lenders concentrate on providing financing for the main asset types such as office, residential, retail,(>80% of all lenders) there is still plenty of availability when it comes to hotel financing, senior housing, or data centres (50 – 60% of all lenders).

The changing CRE lending landscape of Europe

The amount of alternative lenders in Europe has been growing since 2018 onwards and all markets now show availability of alternative lenders, accounting for 40 – 50% of the total market by number. Many however, are involved only in small loan tickets, hence their overall market share by loan volume would be significantly smaller. They are also the main providers of junior or mezzanine financing and 37% would have this as their main lending activity.

For further information contact:

Nicole Lux, FinLoop, nicole@finloop.com