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THE CHASM THAT separates the real estate industry’s immediate funding need from the banking sector’s appetite to finance it will haunt commercial real estate markets in the US and European markets for years. Although refinancing is available, deleveraging and conservative underwriting criteria have reduced the amount of senior debt in the system. At this stage, it is not clear when capital availability will return to pre-crisis levels, or if it ever will. Moreover, the market forces that accelerated the last transatlantic CRE recovery and drove spectacular wealth creation for private equity real estate investors up until 2007 are unlikely to be a factor this time around. Despite being better able to absorb CRE write-downs now than they were two years ago, banks continue to frustrate the opportunistic money waiting in the wings.
The basic difference between now and then is that present government support has afforded US, UK and European lenders greater strategic scope in dealing with balance-sheet impairments.