Some optimism for Commercial sector

Nia Williams

April 1, 2010

Commenting, it said: “The message for the commercial property sector was much the same [as the residential sector] – some good points, but still reasons for caution. First, commercial property default rates also appear to have stabilised, though lenders reported that, over the next three months, there was a risk of a further weakening in borrowers’ covenants.

“Perhaps the most positive aspect of the survey for commercial property was that lenders reported a rise in credit availability in Q1 – they expect a further increase in Q2. That should support the current recovery in capital values. However, it is worth noting that the loosening in property credit conditions remains slower than for the corporate sector as a whole. What’s more, although the history of this survey is fairly short, lenders’ expectations for any change in commercial property credit availability have tended to have been too optimistic in the past.

“Even so, today’s survey was consistent with other evidence that lenders are slowly starting to become more open to providing new commercial property finance again. This is encouraging, but, as with the residential mortgage market, much depends on the economic recovery not being derailed by any upcoming fiscal tightening.”

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