How the debt markets have changed since 2014 – The Property Chronicle
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How the debt markets have changed since 2014

The Fund Manager

A five-year review of the real estate debt demand

Twenty-nineteen marks five years since Laxfield Capital, a commercial property lending company, released their first report on the demand for debt in the UK property market. Such a report, named the Laxfield UK CRE Debt Market Barometer, sought to explain the nascent asset class to institutional investors struggling to find information from which they could benchmark risk and identify opportunity in the sector. Since then, we have release nine reports based on information collected from £130bn of loan requests and across 2,995 deals. Understandably, tracking demand for debt has been a good way to comprehend market evolution, as well as drawing attention to risk signposts and hotspots.

The fifth anniversary since our first report provides an opportunity to reflect on changes over the last half decade – and note where progress has been slow in an era of fast technology.

One very marked change since 2013 has been the shift in demand from refinancing to acquisition loans. In 2012, a large inventory of loans sought refinancing solutions to loans in breach of covenants. Borrowers also had little trust that lenders could meet an acquisition timetable, as bank processes were slowed by additional layers of credit control. While in 2019, with a variety of capital at work, there is more confidence in acquisition finance being delivered on time, non-bank lenders in particular have differentiated their offer by emphasising speed – for which some borrowers are prepared to pay a premium.

In one part of the market, however, there has been a full circle back to 2012 conditions, with many retail loans seeking refinancing against pressured covenants, and a much-reduced pool of debt liquidity available as the market struggles to find its new base.

Loan Requests (Volume) by purpose 2013-2018

Moreover, the demand for finance has become much broader, spreading out from London to the regions, and from core sectors to a greater variety of assets. In this way, office demand is more widely spread through the largest ten cities that have become more actively traded with debt, whilst some buyers in London are utilizing the UK’s secured debt markets less.

Loan Requests (Volume) – London vs. Regions 2014-2018

The Fund Manager

About Emma Huepfl

Emma Huepfl

Emma Huepfl is a Founder and Co-Principal of Laxfield Capital, an investment management business specialising in real estate debt. With more than 25 years’ experience in UK CRE debt markets, she has overseen more than £10bn of debt deals. In 2015 she founded Laxfield National, aiming to address imbalances in regional and mid-market funding. She is a board member of the Commercial Real Estate Finance Council of Europe and authors the bi-annual Laxfield CRE Debt Market Barometer, analysing changing finance demand from a pool of more than £110bn of loan requests.

Articles by Emma Huepfl

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