Trimont: UK and European real estate loan activity rebounds by 200% year-on-year in the first six months of 2024
- Office financing demand recovers as companies upgrade buildings to accommodate hybrid working and sustainability requirements
- Debt funds flock to secure back leverage, generating GBP 1.9 billion in transactions
- European loan activity picks up as lenders re-enter market in search for higher returns
London – 16 September 2024: Trimont, a leading global commercial real estate loan service provider, reported a 200 percent surge in loan activity across its UK and European business increasing its AUM to GBP 7.86 billion in the first half of 2024, from GBP 2.76 billion AUM from the same period in 2023.
This surge in loan activity, where Trimont was appointed as either loan servicer or asset manager for new financing and refinancings, reflects a broader market shift from short-term extensions due to high-interest rates, to longer-term refinancings. Loan activity growth has also been supported by an increase in the use of back leverage, especially by debt funds, as well as a steady recovery in the UK and eurozone economies, softening inflation, and greater certainty around interest rates and valuations.
Office appetite revival
The office sector continues to show a recovery in demand for new lending and refinancing in H1 2024. Office assets accounted for 20 percent of Trimont’s new loan mandates, up from 11 percent in H1 2023. However, these mandates represented only c. 8 percent (or GBP 639 million) of the total loan activity in the six-month period by loan amount, indicating lenders are being cautious and selective in office markets, favouring smaller assets in key central business district (CBD) markets.
“The rise in office loan activity reflects a broader economic stabilisation in the UK and Europe, leading to increased borrower risk appetite for higher-return sectors,” says Michael Delaney, Managing Director, Global Business Development at Trimont. “As companies adapt to new hybrid work models, they increasingly require staff to work partly from refurbished office space, driving office finance demand. Lenders favour investors with clear repositioning business plans to upgrade buildings in core locations to meet modern occupier requirements, notably flexible and sustainability-focussed workspaces that offer wellness amenities and tech services.”
Logistics activity moderates
While the proportion of loan activity in the logistics sector decreased to 11% in H1 2024, down from 39 percent in H1 2023, the sector remains attractive due to the ongoing e-commerce boom. Michael Delaney explains: “Weaker occupier demand in some markets has led to a decrease in valuations, especially during the recent period of yield widening, but the sector remains a long-term favourite among borrowers and lenders, which is supported by secular growth trends.”
Residential demand soars three-fold
The residential sector continues to gain momentum, supported by demographic trends and evolving living preferences. The number of residential loans grew three-fold to approximately 11 percent of all activity from H1 2023 to H1 2024. By loan count, student housing activity also increased year-on-year, from 6 to 10 percent in H1 2024. By loan size, Trimont was mandated on residential loans totalling a combined GBP 1.48 billion in the period, reflecting the post-pandemic recovery in demand for residential units and the ongoing student accommodation supply-demand mismatch.
Alternative sectors
Loan activity in data centres and life sciences grew from GBP 670 million in H1 2023 to GBP 1.08 billion in H1 2024. These sectors, aligned with technological advancements and demographic trends, are considered “future proof,” attracting both borrowers and lenders. Ongoing advancements in AI continues to drive confidence in this sector. The hospitality sector saw a strong recovery in H1 2024, reflecting the resurgence in travel and tourism. Trimont was mandated on loans totalling GBP 1.4 billion in H1, reflecting the continued confidence in the sector.
Growth market: rise in back leverage
Trimont was mandated on back-leverage financing totalling GBP 1.9 billion in H1 2024, highlighting the rapid growth of this financing submarket. Back-leverage financing, such as warehouse lines, repo’s and loan-on loans, are increasingly being used by lenders to significantly enhance debt fund IRRs. “Obtaining back-leverage at low loan-to-value (LTV) thresholds, usually with attractive margins, allows lenders to significantly deleverage their position and increase their returns without having to take on significant risk,” explains Michael Delaney. “Of course, lenders obtaining back-leverage should be mindful that their loan providers enjoy rights that come with sitting first in the cap-stack, such as waiver approval rights and the ability to call valuations.”
He adds: “More UK banks are starting to enter the warehouse/repo loan market, motivated by attractive regulatory capital treatment. While there remains a lack of transparency as to the market’s size, we do expect this market to continue its rapid growth in the final quarter of 2024 and into next year.”
Regional expansion across Europe
Trimont’s loan activity in EMEA has expanded significantly, securing UK loan mandates totalling GBP 3.09 billion in H1 2024, up from mandates worth GBP 2.64 billion in the same period the previous year, representing a 60 percent increase in transactional activity by loan count. The number of new European and pan-European loans increased by 350 percent year-on-year, driven by client appetite to finance deals in the Netherlands, Ireland, Germany, France, and Finland.
“Trimont’s European loan activity expansion reflects an increased number of lenders re-entering the market with revived confidence in their ability to generate the returns they seek,” explains Michael Delaney. “Regions like Ireland and Germany are also drawing more interest due to their economic stability and favourable investment climates. Trimont’s increased activity in these areas reflects a strategic move to capitalise on these attractive conditions. Whilst lender appetite to lend against well located assets is very strong, the limited availability of such deals continues to constrain transactional recovery across all markets”
About Trimont
Trimont is a specialised global commercial real estate loan services provider with GBP 188 billion in loans under management across 72 countries. A leader in complex non-bank credit servicing, Trimont primarily serves non-bank and alternative lenders seeking the infrastructure and capabilities needed to help them scale their business and make informed, effective decisions related to the deployment, management and administration of commercial real estate secured credit.
Data-driven, collaborative and focused on commercial real estate, Trimont brings a distinctive mix of intelligent loan analysis, responsive communications, and unmatched administrative capabilities to clients seeking cost-effective solutions at scale.
Founded in 1988 and headquartered in Atlanta, Trimont’s team of 400+ employees serves a global client base from offices in Atlanta, Dallas, Kansas City, London, New York and Sydney.
For additional information, please contact:
Lauren Holmes
Executive Director, Marketing and Public Relations
Trimont
+1 404 581 7409
lholmes@trimont.com