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New lending to commercial property in the UK fell 41% in 2008, according to the latest edition of the annual Commercial Property Lending Survey conducted by De Montfort University in the UK. This sharp decline, which is expected to continue through 2009, has meant that little new debt is available even for high-quality investment and development projects. Loans that are available are expensive, adding to the difficulties of the industry.

At the same time, the amount of outstanding loans to commercial real estate increased by 10% to £243.3 bn from £220.4 bn at the end of 2007. This jump in outstanding loans was caused largely by the calling down of previously committed facilities and the restructuring (extension) of existing loans. Maturing loans that require refinancing are also shown in the report to pose a major challenge. During the next 5 years, between 2009 and 2013, 69% of all outstanding debt is due for repayment.

Bill Maxted, senior lecturer and consultant at De Montfort University, and author of the report, said: 'On the one hand, the size of the overall debt burden by the commercial property industry is not decreasing - in fact it actually increased by 10% - but on the other hand the amount of debt available for new projects is on a sharp downwards line towards zero.'

He added: 'The quantity of data collected in this survey, together with that of the previous 9 years, will provide an invaluable source of material for the industry, for the banks and for the Government to analyse just what is happening in the market and what needs to be done to ensure that commercial real estate continues to fulfil its important role as both a factor of production and an asset class within the economy, recognising its position as a key source of collateral for loan finance.'

The report is based on contributions from 60 lending organisations.