Real estate debt broadens appeal with investors

Diversification and competition will dominate as key themes for the region’s debt market, according to Duncan.

“To compete with entrenched banks, non-bank lenders will have to find ways to add value to real estate deals through methods such as alternative structures, reduced covenants, or higher and more flexible leverage,” says Duncan.

Further forward, the speed of processing loans will enhance competitiveness.

“The ability to respond quickly will allow lenders to take advantage of the potential opportunities caused by any distress in the market,” says Brindley. “As the market matures for non-banks and debt funds, banks may still have a role to play in providing leverage to debt funds, much like in the U.S. and Europe.”

Conditions right now may still favour commercial banks. But as leading markets in the Asia Pacific region — namely Australia, New Zealand, Singapore, Hong Kong, and China — close the gap with more established debt markets globally, a secular shift is underway, Brindley concludes.