Ever since the setting up of NAMA (Ireland’s National Asset Management Agency) and the considerable expansion of the UK banks’ real estate loan ‘work-out’ teams, well-capitalised real estate investors have been waiting for the proverbial flood gates to open to little avail. In most instances banks have not looked to offload commercial property currently held on their books. In general they have been very accommodating towards borrowers for a variety of reasons, such as the lack of an equity buffer, lack of staff or expertise to deal with the fallout of such a decision that could have induced panic to the property market. Banks on the whole have remained calm, in part due to their low cost of capital. This has meant that property has not yet fully re-priced and remains arguably expensive for those who are not just in it for wealth preservation.
However, January 2012 was a significant month, as it was the start of a spike in the number of five-year loans underwritten at the height of the bull property market. Portfolios let to corporate occupiers bought at the peak of the market by borrowers with loans that are due for repayment, now have the potential to be brought to the market as their owners struggle to repay or refinance the loans. This combined with the fact that the economy – the ultimate driver of rental growth – is shrinking, is reducing the likelihood of a broad market recovery. These factors could be the catalyst for the banks to release stock, presenting opportunities for the well-capitalised investor.