The recovery in the commercial property market in the Midlands is being threatened by a shortage of bank lending, a leading Birmingham property expert has warned.
The last year saw a 17.6 per cent increase in activity in the troubled sector but Lambert Smith Hampton boss Ian Kibble believes banks are still actively reducing their exposure to commercial property.
However, he said that as cash-strapped investors looked for new sources of capital, new funders are entering the market and stepping into the breach.
He said: “Credit availability is going to be a key factor in sustaining the upturn during 2011.
“Banks have retreated from the commercial real estate sector for the first time in more than a decade as traditional lenders attempt to rein in their exposure to property loans.
“The level of outstanding debt to commercial property has dropped for the first time.
“The annual rate of growth in lending to commercial real estate was 20 per cent in 2008.
“Last year it has reversed to a three per cent decrease. This drop in bank lending applies to both UK and overseas banks, although German banks seem to dominate the lending that is actually happening.
“If the recovery is to be sustained, the money has to come from somewhere. In a climate of high inflation and limited returns many are recognising the sustainable income benefits of commercial property and many pension funds are expected to increase their real estate allocations.
“Additionally some other sources of capital have appeared on the market and might partially fill the void left by the banks. Several investment managers, including AXA, Schroders and Eurohypo, have developed strategies to take advantage of the shortage of bank lending and have launched non-listed funds to provide loans.
“This sort of a solution will go a long way to fill the void left by the banks. We would encourage people to speak to us about their funding requirements and we will find the best route available.”