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CBRE EUROPEAN DEBT MAP , Q1 2021
May 2021
CBRE Q1 2021 | CBRE EUROPEAN DEBT MAP
S E N I O R L E N D I N G K E Y T E R M S , P R I M E O F F I C E , Q 1 2 0 2 1
Source: CBRE Debt Map Q1 2021.
Income profile and certainty of tenants continues to drive best pricing and terms. The clustering of cheaper (Paris, Frankfurt, Brussels, Amsterdam, Zurich) and more expensive (Milan, London, Dublin, Lisbon, Madrid) pricing observed in Q4 2020 remains in Q1 2021.
There was little change in most prime office
senior lending markets over Q1 2021; LTVs
were unchanged in just over half the markets,
falling in five and rising in four. Margins
reduced in six markets but rose in Dublin and
Vienna.
When looking across the groups, margins have
typically come down in the markets with lower
LTVs. In the G7 members, LTVs fell in Paris and
Milan, while in the Rest of West group LTVs
moved lower in Lisbon and Madrid
(accompanied by a large fall in margin in
Madrid).
In general, the clustering of pricing observed in
Q4 2020 remains in Q1 2021. Zurich,
Frankfurt, Amsterdam, Paris and Brussels
continue to offer debt in 1.0%-1.31% range,
whereas Lisbon, Vienna, Milan, Dublin and
Madrid continue to be priced in the 1.8%-
2.15% range. London now has one of the
highest costs of debt, due to a sizeable
increase in the 5-year swap rate.
LTV Margin Total Cost of Debt LTV Margin Total Cost of Debt
G7 MEMBERS ↓ 56.25 (58.13) ↓ 1.41 (1.46) ↑ 1.72 (1.65) NORDICS ↔ 59.17 (59.17) ↔ 1.48 (1.48) ↑ 2.05 (1.82)
Paris ↓ 55.00 (60.00) ↔ 1.20 (1.20) ↔ 1.30 (1.30) Copenhagen ↔ 60.00 (60.00) ↔ 0.90 (0.90) ↔ 0.96 (0.96)
Frankfurt ↔ 60.00 (60.00) ↔ 1.00 (1.00) ↔ 1.14 (1.14) Helsinki ↔ 55.00 (55.00) ↔ 1.80 (1.80) ↔ 1.90 (1.90)
Milan ↓ 55.00 (57.50) ↓ 1.80 (2.00) ↓ 1.95 (2.15) Oslo ↔ 62.50 (62.50) ↔ 1.75 (1.75) ↑ 3.29 (2.59)
London ↔ 55.00 (55.00) ↔ 1.65 (1.65) ↑ 2.48 (2.02) Stockholm ↔ .. (..) ↔ .. (..) ↔ .. (..)
LTV Margin Total Cost of Debt LTV Margin Total Cost of Debt
REST OF WEST GROUP ↑ 58.57 (57.50) ↓ 1.53 (1.57) ↓ 1.64 (1.67) CEE GROUP ↑ 63.50 (62.00) ↓ 2.52 (2.59) ↓ 2.63 (2.70)
Vienna ↑ 65.00 (57.50) ↑ 1.95 (1.75) ↑ 2.05 (1.85) Prague ↑ 67.50 (62.50) ↔ 2.05 (2.05) ↔ 2.15 (2.15)
Brussels ↔ 60.00 (60.00) ↔ 1.20 (1.20) ↑ 1.31 (1.27) Budapest ↔ 62.50 (62.50) ↔ 2.50 (2.50) ↔ 2.60 (2.60)
Dublin ↔ 55.00 (55.00) ↑ 1.75 (1.70) ↑ 1.91 (1.86) Warsaw ↓ 60.00 (62.50) ↓ 1.90 (2.25) ↓ 2.04 (2.40)
Amsterdam ↔ 60.00 (60.00) ↔ 1.20 (1.20) ↔ 1.27 (1.27) Bucharest ↔ 60.00 (60.00) ↔ 4.00 (4.00) ↔ 4.10 (4.10)
Lisbon ↓ 50.00 (52.50) ↓ 1.95 (2.13) ↓ 2.15 (2.28) Bratislava ↑ 67.50 (62.50) ↔ 2.15 (2.15) ↔ 2.25 (2.25)
Madrid ↓ 55.00 (57.50) ↓ 1.65 (2.00) ↓ 1.80 (2.15) *Note: Q1 2021 figures shown with Q4 2020 in brackets. Arrows indicate direction of movement. Where ranges have been given for LTV or margin, midpoints have been used. We assume a 0% floor in the swap rate when calculating total cost of debt.Zurich ↑ 65.00 (60.00) ↔ 1.00 (1.00) ↔ 1.00 (1.00)
CBRE Q1 2021 | CBRE EUROPEAN DEBT MAP
S E N I O R L E N D I N G K E Y T E R M S , P R I M E R E T A I L , Q 1 2 0 2 1
Source: CBRE Debt Map Q1 2021.
Transactional evidence and liquidity remains thin. Supermarket or food anchored retail remains more positive, with traditional shopping centres much more challenged pending evidence on occupier demand and rental tone.
.Prime retail LTVs remained largely stable in Q1 2021, with 14 of 17 markets reporting no change on Q4 2020.
Transactional evidence remains thin in the retail sector. Supermarket or food anchored retail is more positive, and there are some early green shoots on the willingness to look at retail warehouse type asset classes. Where lenders are willing to transact, it is typically the debt funds or alternatives – hence higher LTV (at commensurate margin) in some markets.
Looking across the G7 members margins rose everywhere except the UK, which was already considerably higher than its peers. In common with offices, Paris and Frankfurt debt remains notably cheaper than Milan and London.
In the Rest of West group a similar picture to the office sector emerges. Amsterdam and Brussels remain priced closer to Frankfurt, while Lisbon and Dublin are more aligned with Milan. A notable exception to that pattern is Madrid, which saw a 10pp increase in LTV and a 50bps fall in margin.
LTV Margin Total Cost of Debt LTV Margin Total Cost of Debt
G7 MEMBERS ↔ 53.75 (53.75) ↑ 2.18 (1.95) ↑ 2.51 (2.16) NORDICS ↓ 58.33 (60.00) ↓ 1.40 (1.45) ↓ 1.97 (2.00)
Paris ↔ 55.00 (55.00) ↑ 1.50 (1.30) ↑ 1.60 (1.40) Copenhagen ↔ 60.00 (60.00) ↔ 0.90 (0.90) ↔ 0.96 (0.96)
Frankfurt ↔ 60.00 (60.00) ↑ 1.20 (1.00) ↑ 1.34 (1.14) Helsinki 55.00 .. 1.30 .. 1.40 ..
Milan ↔ 50.00 (50.00) ↑ 3.00 (2.50) ↑ 3.20 (2.70) Oslo ↔ 60.00 (60.00) ↔ 2.00 (2.00) ↑ 3.54 (3.05)
London ↔ 50.00 (50.00) ↔ 3.00 (3.00) ↑ 3.89 (3.39) Stockholm ↔ .. .. ↔ .. .. ↔ .. ..
LTV Margin Total Cost of Debt LTV Margin Total Cost of Debt
REST OF WEST GROUP ↑ 56.43 (54.29) ↑ 1.96 (1.86) ↑ 2.22 (1.97) CEE GROUP ↑ 61.88 (61.25) ↓ 2.88 (2.91) ↓ 2.98 (3.01)
Vienna ↑ 65.00 (60.00) ↓ 2.20 (2.25) ↓ 2.30 (2.35) Prague ↔ 62.50 (62.50) ↓ 2.20 (2.25) ↓ 2.30 (2.35)
Brussels ↔ 55.00 (55.00) ↔ 1.50 (1.50) ↑ 1.64 (1.60) Budapest ↔ 60.00 (60.00) ↓ 2.70 (2.75) ↓ 2.80 (2.85)
Dublin ↔ 50.00 (50.00) ↑ 3.00 (2.00) ↑ 3.20 (2.20) Warsaw ↔ .. .. ↔ .. .. ↔ .. ..
Amsterdam ↔ 55.00 (55.00) ↔ 1.50 (1.50) ↔ 1.60 (1.60) Bucharest ↔ 60.00 (60.00) ↓ 4.20 (4.25) ↓ 4.30 (4.35)
Lisbon ↔ 50.00 (50.00) ↑ 2.50 (2.25) ↑ 2.70 (2.40) Bratislava ↑ 65.00 (62.50) ↑ 2.40 (2.38) ↑ 2.50 (2.48)
Madrid ↑ 60.00 (50.00) ↓ 1.75 (2.25) ↓ 1.90 (2.40) *Note: Q1 2021 figures shown with Q4 2020 in brackets. Arrows indicate direction of movement. Where ranges have been given for LTV or margin, midpoints have been used. We assume a 0% floor in the swap rate when calculating total cost of debt.Zurich ↔ 60.00 (60.00) ↔ 1.25 (1.25) .. (1.25)
CBRE Q1 2021 | CBRE EUROPEAN DEBT MAP
S E N I O R L E N D I N G K E Y T E R M S , P R I M E L O G I S T I C S , Q 1 2 0 2 1
Source: CBRE Debt Map Q1 2021.
Logistics debt is now priced very similarly to offices – differences being more the exception than the rule – reflecting the desire of lenders to follow investors in increasing exposure to the best-performing sector of recent years.
Weight of money continues to drive best pricing in the logistics sector, as lenders follow investors in increasing exposure to the best-performing sector of recent years.
In the G7 markets, we see little difference between office and logistics lending terms with margins and LTVs being identical everywhere in Q1.
Similarly, in the Rest of West and Nordics groups, logistics LTVs are equal to those in the office sector in all markets - with margins being slightly lower compared with offices in two markets: Madrid and Helsinki.
Averages of prime logistics lending terms in the CEE markets are also very similar to prime office pricing apart from Warsaw with a lower margin and Prague with a lower LTV.
The exceptions, where pricing is marginally higher likely reflect less competitive tension in in the period reviewed, or where lenders have taken on slightly higher LTV to preserve returns.
LTV Margin Total Cost of Debt LTV Margin Total Cost of Debt
G7 MEMBERS ↓ 56.25 (58.75) ↓ 1.41 (1.51) ↑ 1.72 (1.69) NORDICS ↑ 59.17 (57.50) ↓ 1.38 (1.48) ↑ 1.95 (1.89)
France ↓ 55.00 (62.50) ↔ 1.20 (1.20) ↔ 1.30 (1.30) Denmark ↔ 60.00 (60.00) ↔ 0.90 (0.90) ↔ 0.96 (0.96)
Germany ↔ 60.00 (60.00) ↓ 1.00 (1.20) ↓ 1.14 (1.34) Finland ↑ 55.00 (52.50) ↓ 1.50 (1.75) ↓ 1.60 (1.85)
Italy ↓ 55.00 (57.50) ↓ 1.80 (2.00) ↓ 1.95 (2.15) Norway ↑ 62.50 (60.00) ↓ 1.75 (1.80) ↑ 3.29 (2.85)
United Kingdom ↔ 55.00 (55.00) ↔ 1.65 (1.65) ↑ 2.48 (1.98) Sweden ↔ .. .. ↔ .. (..) ↔ .. (..)
LTV Margin Total Cost of Debt LTV Margin Total Cost of Debt
REST OF WEST GROUP ↓ 58.57 (58.93) ↓ 1.51 (1.54) ↑ 1.72 (1.64) CEE GROUP ↓ 62.50 (63.50) ↓ 2.50 (2.54) ↓ 2.61 (2.65)
Austria ↑ 65.00 (57.50) ↑ 1.95 (1.75) ↑ 2.05 (1.85) Czech Republic ↔ 62.50 (62.50) ↔ 2.05 (2.05) ↔ 2.15 (2.15)
Belgium ↔ 60.00 (60.00) ↔ 1.20 (1.20) ↑ 1.31 (1.27) Hungary ↔ 62.50 (62.50) ↓ 2.50 (2.65) ↓ 2.60 (2.75)
Ireland ↓ 55.00 (60.00) ↑ 1.75 (1.63) ↑ 1.91 (1.78) Poland ↓ 60.00 (65.00) ↓ 1.80 (2.25) ↓ 1.94 (2.40)
Netherlands ↔ 60.00 (60.00) ↔ 1.20 (1.20) ↔ 1.27 (1.27) Romania ↓ 60.00 (65.00) ↑ 4.00 (3.75) ↑ 4.10 (3.85)
Portugal ↓ 50.00 (55.00) ↓ 1.95 (2.00) ↔ 2.15 (2.15) Slovakia ↑ 67.50 (62.50) ↑ 2.15 (2.00) ↑ 2.25 (2.10)
Spain ↓ 55.00 (60.00) ↓ 1.50 (1.75) ↓ 1.65 (1.90) *Note: Q1 2021 figures shown with Q4 2020 in brackets. Arrows indicate direction of movement. Where ranges have been given for LTV or margin, midpoints have been used. We assume a 0% floor in the swap rate when calculating total cost of debt.Switzerland ↑ 65.00 (60.00) ↓ 1.00 (1.25) ↑ .. (1.25)
CBRE Q1 2021 | CBRE EUROPEAN DEBT MAP
D E V E L O P M E N T L E N D I N G K E Y T E R M S , P R I M E O F F I C E , Q 1 2 0 2 1
Source: CBRE Debt Map Q1 2021.
The market remains thin with limited development schemes being brought forward or financed, though there are signs that we are turning the corner.
For a lender comparing the risk of lending to development rather than investment, the former carries risks around construction and leasing on completion, the latter has the potential for income interruption from changing working patterns.
In the G7 markets, the margin premium for development remains a little over 2% on average, rising to just under 2.5% for the Rest of West markets.
However, at the market level the premium can be over 4% (e.g. Amsterdam, Madrid) or as little as 0.75% (e.g. Frankfurt) – suggesting that the opportunities are there for lenders to enhance returns by carefully targeting favoured assets and markets.
Prime office development lending provides an attractive premium for those seeking to substitute construction and leasing risk for collection risk over the short term.
LTC Margin Total Cost of Debt LTC Margin Total Cost of Debt
G7 MEMBERS ↑ 61.25 (60.00) ↔ 3.31 (3.31) ↑ 3.72 (3.60) NORDICS ↔ 60.00 (60.00) ↑ 3.00 (2.75) ↑ 3.10 (2.85)
Paris ↔ 55.00 (55.00) ↔ 2.50 (2.50) ↔ 2.70 (2.70) Copenhagen ↑ .. (55.00) ↔ .. (..) ↔ .. (..)
Frankfurt ↑ 70.00 (65.00) ↓ 1.75 (2.25) ↓ 1.89 (2.39) Helsinki ↓ 60.00 (65.00) ↑ 3.00 (2.75) ↑ 3.10 (2.85)
Milan ↔ 60.00 (60.00) ↓ 4.00 (4.50) ↓ 4.30 (4.80) Oslo ↑ .. (60.00) ↔ .. (..) ↔ .. (..)
London ↔ 60.00 (60.00) ↑ 5.00 (4.00) ↑ 5.99 (4.49) Stockholm ↑ .. (60.00) ↔ .. (..) ↔ .. (..)
LTC Margin Total Cost of Debt LTC Margin Total Cost of Debt
REST OF WEST GROUP ↑ 61.67 (59.64) ↑ 4.02 (4.00) ↑ 4.73 (4.21) CEE GROUP ↑ 65.00 (62.50) ↓ 2.84 (3.14) ↓ 2.94 (3.24)
Vienna ↑ 65.00 (62.50) ↓ 2.50 (2.75) ↓ 2.60 (2.85) Prague ↑ 67.50 (62.50) ↓ 2.35 (2.75) ↓ 2.45 (2.85)
Brussels ↑ .. (60.00) ↑ .. (6.00) ↑ .. (6.30) Budapest ↔ 62.50 (62.50) ↓ 2.80 (3.00) ↓ 2.90 (3.10)
Dublin ↔ 65.00 (65.00) ↑ 5.00 (4.50) ↑ 5.25 (4.75) Warsaw ↔ .. (..) ↔ .. (..) ↔ .. (..)
Amsterdam ↔ 60.00 (60.00) ↔ 5.50 (5.50) ↔ 5.80 (5.80) Bucharest ↔ 62.50 (62.50) ↔ 3.70 (3.70) ↔ 3.80 (3.80)
Lisbon ↔ 60.00 (60.00) ↓ 3.50 (3.75) ↓ 3.70 (3.95) Bratislava ↑ 67.50 (62.50) ↓ 2.50 (3.13) ↓ 2.60 (3.23)
Madrid ↑ 60.00 (52.50) ↑ 6.00 (3.50) ↑ 6.30 (3.80) *Note: Q1 2021 figures shown with Q4 2020 in brackets. Arrows indicate direction of movement. Where ranges have been given for LTV or margin, midpoints have been used. We assume a 0% floor in the swap rate when calculating total cost of debt.Zurich ↑ 60.00 (57.50) ↓ 1.60 (2.00) ↑ .. (2.00)
CBRE Q1 2021 | CBRE EUROPEAN DEBT MAP
P R I M E O F F I C E A N D L O G I S T I C M A R G I N C O M P A R E D , 2 0 1 8 – 2 0 2 0 ( 1 )
Source: CBRE Debt Map Q1 2021.
One of the most notable features of the last two years is the extent to which logistics margins have converged with, and in some cases fallen below, office margins.
Looking across the groups, on average, the G7 members have seen the largest narrowing of the sector spread, from 22.5 bps in 2018 to only 5bps in 2020 – a relative margin shift of 17.5bps. Falls in the spread have been lower elsewhere – the Rest of West (-13bps), the Nordics (-12bps) and CEE (-11bps) – but this is because in absolute terms the average gap in these markets is zero or negative.
Averages hide notable national market variation. While France, Italy and the UK have seen sizeable relative margin shifts, Germany’s margin has remained relatively stable over the two-year period. In contrast, Austria and Ireland have seen a 35bps and 27.5bps shift, respectively, and in Ireland margins on logistic debt are now lower than on office debt. This is also true of Finland, Portugal, Romania, Slovakia and Spain.
Structural change and increased investor interest in the logistics sector is driving down yields and causing office and logistics margins to converge. Logistics margins are now the same as office in ten of the 20 markets covered and lower than offices in five.
Dec-18 Dec-20
Margin Office Logistics Spread (Bps) Office Logistics Spread (Bps) Relative Margin Shift (Bps)
G7 MEMBERS 1.38 1.60 22.50 1.46 1.51 5.00 -17.50
France 1.00 1.25 25.00 1.20 1.20 0.00 -25.00
Germany 1.00 1.20 20.00 1.00 1.20 20.00 0.00
Italy 2.00 2.20 20.00 2.00 2.00 0.00 -20.00
United Kingdom 1.50 1.75 25.00 1.65 1.65 0.00 -25.00
REST OF WEST GROUP 1.55 1.66 10.36 1.57 1.54 -2.86 -13.21
Austria 1.90 2.25 35.00 1.75 1.75 0.00 -35.00
Belgium 1.20 1.25 5.00 1.20 1.20 0.00 -5.00
Ireland 1.30 1.50 20.00 1.70 1.63 -7.50 -27.50
Netherlands 1.05 1.20 15.00 1.20 1.20 0.00 -15.00
Portugal 2.18 1.85 -32.50 2.13 2.00 -12.50 20.00
Spain 1.75 1.75 0.00 2.00 1.75 -25.00 -25.00
Switzerland 1.50 1.80 30.00 1.00 1.25 25.00 -5.00
NORDICS 1.23 1.41 18.75 1.48 1.48 0.00 -11.67
Denmark 0.90 0.90 0.00 0.90 0.90 0.00 0.00
Finland 1.05 1.20 15.00 1.80 1.75 -5.00 -20.00
Norway 1.70 1.90 20.00 1.75 1.80 5.00 -15.00
Sweden 1.25 1.65 40.00 .. .. .. ..
CEE GROUP 2.54 2.60 6.00 2.59 2.54 -5.00 -11.00
Czech Republic 2.65 2.75 10.00 2.05 2.05 0.00 -10.00
Hungary 2.50 2.60 10.00 2.50 2.65 15.00 5.00
Poland 1.80 1.90 10.00 2.25 2.25 0.00 -10.00
Romania 3.50 3.50 0.00 4.00 3.75 -25.00 -25.00
Slovakia 2.25 2.25 0.00 2.15 2.00 -15.00 -15.00
CBRE Q1 2021 | CBRE EUROPEAN DEBT MAP
Austria
Belgium
Czech Republic
Denmark
Finland
France
Germany
Hungary
Ireland
Italy
NetherlandsNorway
Poland
Portugal
Romania
Slovakia
Spain
Switzerland
U.K.
-30
-20
-10
0
10
20
30
40
0 5 10 15 20 25 30 35 40
Two-
year
rela
tive
mar
gin
shift
*
Two-year relative yield shift* and two-year percentage point increase in logistics share of total investment
P R I M E O F F I C E A N D L O G I S T I C M A R G I N C O M P A R E D , 2 0 1 8 - 2 0 2 0 ( 2 )
Source: CBRE Debt Map Q1 2021.
One explanation for the convergence of margins would be that as the logistics share of total investment increased, and as the logistics:office yield spread narrowed, so too would the logistics:office margin spread. The scatterplot to the right looks at this relationship.
For the period Dec-18 to Dec-20, the horizontal axis plots a rank of the relative yield shift and the percentage point increase in logistics share of total investment. The vertical axis shows relative margin shift.
In markets that had a relatively large margin spread in Dec-18, and that have had large relative yield shifts and/or strong growth in logistics share of total investment, the relationship holds pretty well.
For markets such as Denmark, the Netherlands or Belgium, where margin spreads were narrow to begin with – or in Germany which was already competitively priced in 2018 - the effect is less pronounced.
In contrast, Poland, Portugal and Hungary are outliers which cannot be explained in this way.
In some countries debt margins have converged faster than yield movements and investment volumes can explain. However, relative margin spreads are fairly well correlated with relative yield spreads and relative investment volumes.
*Note in both cases, an increase represents margin/yield compression
Logi
stics
mar
gins
hav
e co
nver
ged
with
offi
ce m
argi
ns
Logistics yields have converged with office yields and / or logistics investment share has increased
CBRE Q1 2021 | CBRE EUROPEAN DEBT MAP
DISCLAIMERS AND WAIVERS
8
LONDON
EMEA
DEBT & STRUCTURED FINANCEUK & EMEA
PAUL COATESHead of Debt and Structured Finance UK & EMEA
STEVE WILLIAMSONChairman of Debt and Structured Finance
EXECUTIVE & SENIOR DIRECTORS
ANDREA PITTALUGASENIOR DIRECTOREUROPE
CHIARA ZUCCONSENIOR DIRECTOR
DIRECTORS
MICHELLE QUINNDIRECTOR
CHRIS MARCHANTDIRECTOR
IRELAND
ANDY TALLONEXECUTIVE DIRECTOR
THE NETHERLANDS
ROBERT-JANPETERSEXECUTIVE DIRECTOR
PHILIP ZWARTSENIOR DIRECTOR
AARTVISSERDIRECTOR
REMKE MORAALDIRECTOR
GREGOIRECHALLESENIORDIRECTOR
FRANCE
MARTINAMUEHLHOFERHEAD OF CAPITALADVISORS ITALY
ITALY
JURAJBIELIKASSOCIATE DIRECTOR
SLOVAKIA
SWITZERLAND
AMINEHAMDANIEXECUTIVE DIRECTOR
FINLAND
ANNE LAUKIASENIOR DIRECTOR
PIOTR PIKIEWICZASSOCIATEDIRECTOR
POLAND
IGORBORREGOASSOCIATEDIRECTOR
PORTUGAL
DIRK RICHOLTMANAGING DIRECTOR
GERMANY
SPAIN
IÑIGOLASPIURNATIONAL DIRECTOR
ADAM LUCIUKHEAD OF DSF
POLAND
JOHN HARDIEDIRECTOR
STEPHEN BARRDIRECTOR
CHRISGOWEXECUTIVE DIRECTOR
CZECH REPUBLIC
JAKUBSTANISLAVDIRECTOR
SPAIN
IGNACIOMATIACCIDIRECTOR
AARON HUSSEINSENIOR ECONOMIC ANALYST
RESEARCH