New UK commercial real estate lending surged by 33% in the first half of 2025, reaching £22.3bn, according to the latest report from Bayes Business School.

Meanwhile, loan market syndication surpassed £10bn in the first half, nearly matching the full-year total for 2024 amid an “increasingly bullish” lending market.

The total amount of new loans written by UK lenders in the first half of this year equated to 61% of the £36.3bn raised in the whole of 2024.

UK loan origination peaked in 2015 at £53.7bn.

Bayes said banks had also made significant progress in reducing defaulted loans, achieving a 10% to 20% cut through loan refinancing (accounting for 70% of the reduction) and increased loan syndication.

The report’s author, Dr Nicole Lux, said: “Those steps renewed banks’ appetite for new lending, with loans now offered at highly competitive rates. Lender sentiment has turned increasingly bullish, with 39 lenders indicating a preference for issuing loans exceeding £100m.”

The report also found the most enthusiasm for financing office and logistics assets, with student housing and residential properties close behind.

Development financing has emerged as a large growth area and accounted for 22% of new lending and 19% of total outstanding commercial real estate debt, the report added.

Banks increased their commercial development finance activity by 20% over the period and now have £31bn in development loans on their books, close to the previous peak of £43bn in 2007.

UK banks supply 56% of all residential development finance and 28% of all other commercial development finance in the market.

Meanwhile, the overall loan default rate has risen to 6.3%, with primary debt funds reporting a far higher default rate of 20.3%, up from 15.2% in December 2024. Bayes said this revealed elevated risk in their portfolios.

Nick Harris, head of cross-border valuations at Savills, said the survey showed the lending market had remained “a highly liquid and competitive environment”, highlighting “a notable increase in lending” in H1.

“The lending industry has considerable capital to deploy, which bodes well for the anticipated increase in transactions for the remainder of the year and into 2026,” he added.

Neil Odom-Haslett, vice-president of the Association of Property Lenders and head pf private credit and commercial real estate lending at abrdn, said: “Overseas lenders are keen to increase their exposures again – after taking a bit of a break.

“Banks, which now have excess capital, are competing aggressively on pricing, driving senior loan margins down by 25bps to 50bps, particularly for prime office and logistics assets.”

Odom-Haslett added that he hoped lenders would maintain lending discipline despite a trend towards “covenant- lite deals”, adding that it was “slightly concerning” to see debt funds showing default rates above 20%.