Commercial property lending at record levels

 Australian commercial property loans have reached an all-time high of $314.6 billion — an increase of 12.8 percent compared to last year.

The surge in commercial lending is the largest annual growth since 2009.

According to the Australian Prudential Regulation Authority (APRA), total commercial real estate debt increased by $35 billion over the year to June 2022, prior to worldwide central banks hiking interest rates.

Offshore lenders are also taking on a greater share of the country’s commercial property loans, according to APRA.

Foreign banks accounted for 24.2 percent of total commercial real estate debt, up from 20 percent three years ago.

The current share of debt held by foreign banks is now close to an all-time high, according to Commercial Real Estate and Property For Sale and Lease in Australia | CommercialRealEstate.com.au.

Debt exposure held by foreign banks in the office, industrial, retail and tourism sectors also reached all-time highs.

The market share of Australia’s big four banks (ANZ, NAB, CBA, and Westpac) fell during the June quarter, to 70.3 percent, well below its 10-year average of 78.2 percent.

Australia’s big four banks’ share of lending peaked at 84.7 percent in 2013.

Loans to the office sector reached an all-time high and, while high-density development and land subdivision debt increased 7.4 percent over the year, exposure to the sector has fallen far below its 2017 peak.

The country’s largest bank, CBA, had commercial property loans of $87.3 billion on its books by the end of June, according to Commercial Real Estate and Property For Sale and Lease in Australia | CommercialRealEstate.com.au.

CBA said its exposure to apartment space was 45 percent below the last lending peak in December 2016. Retail and office debt was the largest weightings in CBA’s portfolio.

Retail exposure was tilted towards landlords with non-discretionary retailers as anchor tenants. Exposure in the office sector was biased towards premium, as well as A and B-grade buildings.

Only about 0.4 percent of that debt was considered troublesome or comprising impaired assets, compared with 3.1 percent of the bank’s $11.2 billion construction loan book