21 Apr 2022
Although borrower demand for real estate loans in the first quarter of 2022 remained skewed towards residential properties, there was a notable increase in requests for debt for office and retail assets, according to the owner of a pan-European digital real estate debt platform.
Finloop, which was launched in January 2020 by Thomas Schneider, former chief investment officer of online property marketplace BrickVest, and Nicole Lux, senior real estate research fellow at Bayes Business School, part of City, University of London, analysed lending requests and agreements submitted via the pan-European platform in the first three months of the year.
More than 48 percent of the €1.4 billion of requests and agreements related to residential properties and developments, including student housing and senior living.
When you add the loans requested for hotels to the data on residential, the number of loan requests is even higher and confirms the immense appetite for living accommodation assets, said Schneider, FinLoop’s chief executive.
However, Finloop reported that, despite a significantly lower number of loan applications compared with residential, the monetary value of requests for office and retail properties via the platform increased in Q1 2022 compared with Q4 2021.
In total, more than 27 percent of the total value of loan requests submitted via the platform related to residential assets, including student housing. Meanwhile, the value of requests relating to retail assets increased by 14.3 percentage points to 18.9 percent of the total volume recorded.
Office assets accounted for 21.7 percent of deal volume in Q1, up from 14.5 percent in Q4 2021. The company noted many assets were either developments or refurbishments in need of capital expenditure.
The levels of demand confirm a growing optimism across Europe that the worst of the pandemic is now behind us, commented Schneider.
He added that lenders on the platform are requiring borrowers to meet environmental, social and governance criteria. It is … clear that the real estate industry is responding to the demand, and the expectation of consumers that new-build assets will meet the highest sustainability standards,
he said.
In H2 2021, Finloop analysed how the increasing focus on ESG in real estate is affecting property lending.
Lux said it was apparent that finance requests for real estate projects made via the platform were increasingly being rejected by lenders due to concerns about ESG issues.
The filtering of loan requests against ESG criteria has continued and is a progressive influence upon the market activity, and borrowers who ignore the new paradigm will potentially miss out on finance opportunities and could face higher borrowing costs,
she said.