The main players in the financial market are optimistic about the sector's development and expect to increase lending for real estate projects throughout the year. However, they are being more selective about the assets they choose to finance. Around 50% of them are confident of increasing their financing activity in 2023, while only 15% state the opposite.
According to the first "Spain Lender Intentions Survey 2023", carried out by the financing and debt area of CBRE, Spain is positioned as the most attractive European country for the real estate financing market. This conclusion comes in a context marked by a significant increase in interest rates and a generalized instability in the macroeconomic environment.
The survey, which was carried out among the most active players in the market, including banks, debt funds and, to a lesser extent, insurers, reveals that the majority adopt a conservative stance on the criteria for granting financing. Some 60% of respondents expect to be more cautious, while only 12% are more aggressive in this regard. In the face of economic uncertainty and rising interest rates, more than 50% of the participants consider applying more restrictive positions on LTVs and debt yields, with over 40% of the respondents.
At the same time, 80% of the participants believe that the recent events that have affected the banking sector in the United States and Switzerland will not have a significant impact on their activity.
Sustainability, the key to financing real estate projects
Another of the main trends observed is the growing importance of sustainability in the financing criteria. According to the CBRE survey, 85% of financiers plan to take ESG criteria into account in their lending decisions by 2023.
For Iñigo Laspiur, senior director of Debt Advisory at CBRE Spain, «rising interest rates, their impact on asset valuations and the fear of a recession are the main concerns of the main players in the real estate debt and financing market in Spain. We are seeing how this complex environment is leading to much more selective criteria in terms of the type of assets to be financed and also a more conservative stance. Nevertheless, market activity is expected to reaffirm confidence in the Spanish real estate sector and specifically in the evolution of sectors such as the hotel and multifamily sectors».
Hotels, student residences and multifamily, the sectors with the highest liquidity expectations
According to the survey conducted by CBRE, in terms of the different sectors, hotels, student residences and multifamily are expected to be the assets with the highest liquidity expectations in the real estate financing market. On the other hand, offices and retail will be the segments with the lowest liquidity.
The study also shows that the hotel and logistics sectors have the most favorable LTV ratio for senior loans.
Miriam Goicoechea, Director of Research at CBRE Iberia, explains the fundamentals of these segments: «Sociodemographic factors and new social trends are driving up the living segment (which combines multifamily, student residences, flex and senior living), which remains the leading asset class by volume of real estate investment. This is closely followed by the hotel segment, which is enjoying a spectacular recovery and has good prospects. Offices and retail occupy the third and fourth positions in the balance of the first half of the year. Overall, the enormous polarization between the different types of product stands out, which is reflected in higher rents and occupancies in those assets that meet the standards demanded by occupiers in terms of quality, technology, flexibility and ESG».