1. Will bank lending ever rebound to its historical peak?
Bank lending should continue to increase as CRE continues to offer better risk adjusted returns versus other asset classes. Also, demand for debt continues to increase as leverage moves up and transaction volumes improve. However, bank’s market share as a percent of total lending will not return to its dominant peak as the lending market continues to fragment and diversify. Increased regulation and the need to repair or improve balance sheets forced banks to reduce lending activity and as a result new sources of capital filled the void. This trend should continue as the market benefits from diversified funding sources.
2. Why are debt funds becoming so popular with investors?
Debt funds allow investors gain exposure to the CRE lending sector without having to grow a platform. As yields on other asset classes continue to tighten due to the low interest rate environment and quantitative actions by the central banks, investors continue to increase their allocation to CRE and it comes as no surprise that debt funds continue to raise large amounts of funds.
3. What effect is the arrival of American debt funds having this side of the pond?
American funds have improved competition this side of the pond by increasing liquidity. They have flexible capital that can write large tickets and execute quickly. On the back of their success, an increasing number of European funds have begun to enter the market.
Javier Villanueva will be present at British GRI in London on the 28th and 29th April