Economic headwinds in 2022 have failed to dampen lender interest in Australian property, with industrial assets getting the most attention, according to a new CBRE survey.
CBRE Research tapped a mix of 43 local and international banks and non-bank lenders for its Q4 2022 Lender Sentiment Survey, with 44% expressing a desire to increase their commercial loan portfolios.
CBRE’s managing director of debt and structured finance, Andrew McCasker, noted that this result was slightly higher than the third quarter result and was led by non-bank lenders, with higher interest rates generating higher yields. high, making the Australian market more attractive.
Industrials remains the preferred sector overall, with almost three-quarters of survey respondents expressing a preference for this asset class.
Preferred asset class for new investments
“Domestic banks also favor stabilized office and retail assets, confirming a flight to credit quality amid macro uncertainty,” McCasker said.
“In the meantime, non-bank lenders are keen to increase their exposure to build-to-sell projects and office repositioning opportunities, reflecting the higher yields available when lending against riskier assets. These lenders have also raised a significant credit, suggesting that they are waiting on the sidelines for distressed opportunities.”
The higher risk appetite of non-banks is also reflected in pre-lease requirements for new development projects, with non-banks more likely to opt for a pre-lease rate below 40% , while national banks favor projects that have exceeded 60% pre-committed.
The survey shows that only 7% of respondents are looking to reduce the size of their loan portfolios, with 49% expecting to stay around current levels and 44% looking to increase.
Will Edwards, CBRE’s Associate Director, Debt and Structured Finance, noted that domestic banks are expected to hold or even grow their market share given their strong balance sheets and low exposure to wholesale markets.
Conversely, there have been some early signs of liquidity problems from international banks, which could hamper their ability to grow their books, Mr Edwards said.
The survey highlights that rate expectations have risen since the third quarter, with more than 40% of lenders expecting margins to rise by 10-20 basis points and a further 30% expecting a rise. more than 20 basis points.
“While there are ongoing loan servicing issues, we have seen a slight return in coverage requirements, suggesting that lenders are confident the interest rate cycle is nearing a peak,” he said. said Mr. Edwards.
Over the next three months, lines of credit on new loans are expected to change:
