Sentiment survey: less pessimism overall, but continued wariness about retail, availability of UK debt

The Commercial Real Estate Finance Council Europe’s second quarterly sentiment survey, provided exclusively to Real Estate Capital by the industry body, shows continued wariness among property finance professionals about the market they operate in.

The survey was carried out between 28 March and 15 April, amid growing concerns about the state of the retail sector and the announcement of a further delay to the UK’s planned exit from the EU. Although the responses pointed to greater optimism than in Q1, expectations for retail and the availability of debt in the UK were lower.

The survey provides insight into a commercial real estate lending market that has grown more diverse but which remains largely opaque. Three questions were altered from the Q1 survey, to allow for different responses for the UK and the rest of Europe.

A reminder of the methodology: the anonymous survey is sent to the key contact at each firm in the CREFC Europe membership. Two additional respondents are permitted from each organisation. CREFC Europe believes respondents account for an aggregated commercial property loan book of more than £130 billion (€151 billion).


We conducted our survey during a period that offered no relief from political uncertainty and when the Brexit can, as expected, was kicked firmly down the road, writes Peter Cosmetatos, chief executive of CREFC Europe.

Overall, sentiment remains cautious, especially on retail. We cannot ignore politics, but the pervasive pessimism reflected in our first survey, three months ago, has moderated a little. Our respondents’ expectations – in relation to the political and economic environment, real estate fundamentals, capital liquidity and lending terms – have drifted towards ‘no change’ and, in some cases, towards ‘moderately better’.

There were no significant shifts in people’s perceptions of the prospects for different types of lender, with non-banks still viewed more positively than banks.

Attitudes to market conditions in the UK and the rest of Europe diverged strongly. Pessimism in the UK appears to be matched by tightening credit conditions: 65 percent of respondents thought market conditions in the country had worsened and almost half said financial covenants had tightened during the previous three months. In contrast, substantial majorities reported that market conditions and financial covenants were broadly unchanged across the rest of Europe, with the balance in each case skewing in the opposite direction from the UK.

Only 10 percent of respondents expected more debt to be available in the UK next year, compared with 41 percent for the rest of Europe.

Retail remains in the doldrums, though 20 percent of respondents reported that their views on the sector had not changed – a 15 percent rise on the previous survey. As was the case three months ago, everyone else had grown more pessimistic about retail. The sub-sectors attracting the greatest levels of optimism remain build-to-rent, student accommodation and other alternatives.

In what are widely seen as tricky, late-cycle conditions, views about where the most attractive risk-adjusted returns are to be found tended towards assets carrying lower risks, especially in terms of location and types of lending. Commercial bank respondents bucked that trend somewhat, seeing the case for a little more risk compared with their conservative assessment of three months ago, particularly when it came to asset types.
‘Caution’ and ‘uncertainty’ remain the words most commonly used to describe the market, with many respondents complaining about static, confused or frustrated conditions. However, fewer specifically mentioned politics or Brexit, and a larger number expressed optimism – and even enthusiasm – for the opportunities available in the current environment.