Editor’s Letter: The benefit of hindsight

A little more than 10 years ago, it became apparent that a global credit crunch was happening, foretelling the worst crash to hit financial markets since 1929. On a lighter note, Real Estate Capital is celebrating a happier anniversary – a decade of covering the European real estate finance markets.

They say timing is everything, and the launch of this publication as a booming market was about to go bust led to 10 years reporting on arguably the most fascinating period in the history of property finance.

The anniversary has provided a good excuse to revisit the archive; the highlights of which can be found in our REC Decade series of features, the first of which can be found here.

The most glaring conclusion to draw from this retrospective is that today’s market has been heavily shaped by the cataclysmic events of 2007-08. Leverage is lower, complicated financial products are no longer in vogue, and banks are far more risk-averse. That has opened the door to the emergence of an alternative lending sector, which has taken the riskier slices of property debt out of the banking system.

Generally, there is a liquid market for real estate debt, but on more sensible terms than at the peak of the last cycle.

Post-crisis regulation has undoubtedly played a role in shaping a more disciplined sector. Views will differ on whether there is the right amount, or type, of regulation. But a greater scrutiny of the market has prevented banks from creeping back towards the reckless origination seen between 2004 and 2007. In addition, many of those in senior lending positions today are veterans of the last cycle and no doubt bring with them first-hand awareness of how things should be done differently this time around.

However, the further the market is from 2007, the more memories will fade and experienced people move on. Today, there is more equity at play and debt is a facilitator rather than an enabler. Those active in real estate finance are taking a prudent approach, but as the real estate cycle draws on, lenders still need to demonstrate that lessons from the past have been learnt.

Leading the pack

Savills’ assertion that as many as 250 organisations are financing commercial real estate in today’s market is a good measure of how liquid the sector is. Each year, Real Estate Capital profiles the top 40 lenders active in the market.

There were some tough decisions to make this year, with an increased field of candidates to choose from, but after careful consideration and sounding out a wide profile of market players, the leaders of the pack have been highlighted.

For the first time, lenders have been grouped by type, making it noticeable that banks continue to dominate the sector. However, a strong showing of insurance firms and debt fund managers of varying shapes and sizes contributes to a diverse picture. Find out more here.