According to an article on JLL Investor, landlords and tenants are turning to alternative sources of financing to meet their needs as occupiers across all asset classes are seeking flexibility in their lease agreements.
While governments and banks remain the main source of real estate debt in Europe, alternative lenders are now entering the market and helping investors make decisions that are more risk averse.
“Debt funds, insurance companies and pension funds are making European inroads – and COVID-19 looks like it is accelerating that diversity,” says Tom Brook, debt and structured finance director at JLL.
Additionally, buyers and investors are seeking income protection from vendors in the forms of cash escrows and retentions against non-payment of rent, thus easing concerns over short-term risks and allowing for long-term relationships.
The article highlights a few changes in Europe’s lending landscape:
- Almost a third of Europe’s real estate lending is from non-bank sources
- Diversifications in Europe’s lending market resemble that of U.S.
- Core real estate loan pricing has risen
- Alternative lenders and the flexibility they provide will play a major role in Europe’s real estate lending landscape.
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