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CBRE’s Australia Lender Sentiment Survey for 1H25 has revealed that appetite for commercial lending is strong among lenders.
Despite global uncertainty, 56 per cent of lenders want to increase commercial real estate exposure and no surveyed lenders intend to decrease their books, a slight drop from 60 per cent in 2H24.
Lender investment preferences place industrial and logistics as the most attractive option. This was followed by residential. CBRE said that local lender activity remains cautious towards the office sector.
Ranked, the preferred lender investment options were:
- Industrial
- Residential – build to sell
- Residential – build to rent
- Retail
- Office – repositioning
- Hotels
- Office – stabilised
- Healthcare
Property type and location rank among the top three factors influencing lenders’ willingness to refinance, as commercial real estate markets become increasingly divided across all sectors nationwide.
CBRE debt and structure finance director, Will Edwards, said: “Amid caution in the office sector, we are seeing lenders take a considered approach to the sector reflective of flight to quality in the asset class. For Prime and A grade assets in core locations lenders will price aggressively for the exposure.”
Optimism regarding credit margins is strong with 32 per cent of lenders expecting them to increase over the next quarter.
CBRE’s managing director of debt and structured finance, Andrew McCasker, said: “The domestic banks sit on strong balance sheets and there has been a significant amount of capital raised in the private credit sector. This is underpinning competitive tension and strong appetite for lending to quality assets and sponsors.”
Essentially, lenders are still active but selective, favouring strong assets in key sectors.
Further, loan-to-value (LVR) ratios saw an uptick, as 56 per cent of lenders noted a preference of 60 per cent and over. CBRE said this was largely due to response rates from non-bank lenders.
Meanwhile, interest coverage ratio (ICR) requirements saw half of the respondents note a 1.35 times ratio. Nearly all (97 per cent) of the lenders noted ICR requirements of 1.5 times or below.
