The European real estate debt market continues its robust recovery but with a notable increase in activity among non-bank lenders.

As banks have taken a more cautious approach to lending, credit strategies have gained traction across Europe and elsewhere with US $110.7 billion mobilized globally for debt strategies across more than 330 closed-end funds since 2020.

But the lender dynamics are changing with non-bank lenders increasingly getting in on the act: “Domestic banks now account for only 35% of outstanding loans, compared to more than 70% twenty years ago," says Cameron Ramsey, Director of Capital Markets, EMEA & UK Research & Strategy.

The figures, published in the bi-annual Bayes CRE lending report, refer to UK deals but they offer a ‘good proxy for what we’re seeing in Europe’ Ramsey says: “Until 2011, real estate lending was entirely bank dominated, split across UK and other geographies but, since then, an increasing proportion of insurers and other lenders have come into the market and in 2023 accounted for a record share above 40%.”

Despite the cautious optimism, improvements on the horizon are expected to be gradual, according to Ramsey: “Much of the core capital, both in equity and debt will remain on the sidelines until there is greater certainty surrounding macroeconomic conditions."

Until then, investors will need to continue to explore alternative sectors and financing sources to drive returns.