Banks are becoming more willing to take on development risk again, speakers said at MIPIM UK today.
Phil Mayall, development director of the English Cities Fund, told delegates that the hurdles were coming down for clearing banks to fund office schemes.
He said the banks still refuse to look at entirely speculative development and wanted pre-lets before a scheme is begun.
But Mayall said instead of insisting on a 100% pre-let, banks were coming down to 50% pre-lets with rental guarantees from the developer.
Mike Delaney, partner in real estate finance at Nabarro, said debt funds however remained the main source of development finance.
He said some of the new debt funds had not “got away” the way they would have liked due to pressure on margins, but said he believed some of the more established funds would remain in the market for a long time.
Tim Roberts, executive director at head of offices at British Land, said debt funds were getting bolder and moving up the risk curve, but added they took their “pound of flesh” in payment terms as a result.