The global debt funding gap on commercial property for the period 2011-13 shrank 17 percent to $202 billion after the amount of outstanding real estate debt in the United States fell and forecast property prices there rose, research showed.
Property consultancy DTZ said much of the drop from $245 billion (150 billion pounds) in November 2010 could be pinned on outstanding U.S. debt falling from $49 billion to zero, driven down by a 6 percent drop in debt and a 9 percent rise in forecast values.
“Partly offsetting this are Japan, France and Ireland which saw increases in their (funding) gaps. But, Japan, the UK, Spain and Ireland continue to have the largest absolute and relative gaps globally,” DTZ said in a statement on Thursday.
The debt funding gap is the shortfall between debt needing refinancing and the money available to do so.
DTZ also said there was $403 billion of new equity available for property investment over the next three years, up 7 percent from its estimate in late 2010 and almost twice the funding gap.
“Efforts are now well underway on both the debt and equity side to bridge the shrinking debt funding gap, particularly in Europe,” DTZ said.
“Loan provisioning has the potential to cut Europe’s debt funding gap by 8 percent to $109 billion from $118 billion. Additional lending capacity to refinance loans is available from 80 billion of new equity available from insurance companies.”
Global insurance companies are taking an increasing role in property financing, plugging the gap created by capital adequacy minded banks seeking to limit their exposure to the sector and comply with incoming solvency regulations.
In March, AXA Real Estate, a unit of French insurer AXA, said it planned to raise more debt funds to take advantage of a squeeze on European commercial property finance.
DTZ’s research showed the rump of the outstanding debt at end-2010 was owed to banks — 96 percent in Asia Pacific, 75 percent in Europe and 55 percent in North America.
Outstanding debt linked to commercial mortgage-backed securities CMBS.L accounted for 4 percent of the outstanding debt in Asia Pacific, 6 percent of that in Europe and 22 percent of that in North America, DTZ said.
“This diversity means the lending market is less reliant on just one main source of finance. With life insurers becoming particularly active again and the CMBS market opening up, the refinancing of loans is less of an issue,” DTZ said.
At country level, Japan had the largest debt funding gap at $84 billion, up $14 billion since November 2010, followed by the UK at $42 billion, down $12 billion. Spain was ranked third with a $28 billion funding gap, down $5 billion.
The research also showed that in 2011 the UK had a $52 billion refinancing requirement, of which just $39 billion was available. In 2012, the requirement was for $71 billion, with $56 billion available, while in 2013 it was $87 billion, with $73 billion available.
Source : Reuters
