According to a recent report, the number of commercial property loans that are currently in default has skyrocketed an astonishing 400% within just a single year. This study, focusing on bank lending within the commercial property sector, reveals that while the total amount of lending continued to increase in 2007, nearly four hundred loans fell into default, a significant rise from fewer than eighty in 2006.
Interestingly, despite the aggregate value of these loans being relatively modest at £250 million, this sharp rise indicates that a growing number of smaller property investors and developers are encountering serious challenges in light of the ongoing financial crisis.
Moreover, in a surprising development, the number of commercial property loans that have breached financial covenants, yet have not entered default, actually saw improvement over the year. Loan breaches decreased from 1,900 to 1,050, indicating that banks are actively working to address debt issues prior to progressing to default status.