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Octopus Real Estate offers an alternative solution for commercial borrowers

There are still opportunities for borrowers in commercial real estate to secure loans through alternative lenders

Octopus Real Estate completed site finance on a 0.44-acre freehold site in James Street, Dublin, which has planning for a 145-bedroom aparthotel, due to be completed in 2025

Fri May 26 2023 - 05:00

The property market in the Republic of Ireland is quite tricky to forecast at present, with a strong real economy, but many of the same financial headwinds being felt across Europe.

Ireland has plenty to be positive about; unemployment remains low - sitting at around 4.3 per cent - and GDP, often used as a good economic indicator, has led performance across Europe, hitting 13.6 per cent in 2021 and 12.2 per cent in 2022, with the 10-year average sitting at 9.1 per cent.

In the year ahead, Ireland is anticipated to outperform the rest of Europe from an economic perspective. The latest forecasts from the European Commission estimate GDP growth of 3.2 per cent, compared to an EU average of 0.3 per cent. The economy is also benefiting from the country’s falling debt burden. Debt to GDP has fallen to 59.0 per cent compared to well over 100 per cent as little as two years ago (the UK is currently at 80.7 per cent).

Market pressures affecting commercial real estate

However, even with this positive backdrop, inflation and the ongoing war in Ukraine continue to create a sense of uncertainty and the European Central Bank has raised interest rates regularly since the middle of last year. It’s no surprise that these rising debt costs are creating some challenges in the commercial real estate market.

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James Nunn, senior investment manager at Octopus Real Estate: “We believe that given the established economy, many sectors within the Irish market still offer strong security.”

Many investors and lenders have been taking a careful approach so far in 2023, including high street banks who have been cautious in Ireland for some time now. This ‘wait and see’ approach often means that borrowers are left struggling to receive the support they need to fund their projects, especially those with complex or bespoke needs, such as half-completed developments or land with planning consent.

To add to the pressure on borrowers, the loan-to-value ratios (LTVs) which lenders are prepared to lend at have continued to drop off. This has contributed to a tendency for banks to lend only to the most prime assets, leaving even more borrowers without a suitable solution.

However, according to James Nunn, senior investment manager at Octopus Real Estate: “Although borrowers in commercial real estate are experiencing funding challenges at the moment, there are still opportunities for them to secure loans through alternative lenders who have discretionary capital and can be more nimble in their approach. There are opportunities for lenders too; we believe that given the established economy, many sectors within the Irish market still offer strong security.”

Support available for borrowers

Despite challenges in the market there is still support available for borrowers, especially through non-bank lenders such as Octopus Real Estate. Octopus is one of the most established non-bank lenders in the UK, widely recognised as one of the leading providers of short-term property finance. Since inception in 2009, Octopus has lent more than £6.2 billion. Octopus provides funding across all commercial asset classes including land with planning consent for residential, hotel and student housing.

The experienced commercial lending team structure every loan to meet individual needs and deadlines, providing borrowers with bespoke solutions and delivering with certainty. To ensure speed of service, all loans are supported by local professional teams including lawyers, valuers, and quantity surveyors.

Case study: Funding the James Street hotel – land with planning for 145-bedrooms

Where: James Street, Dublin

What: Site finance – 12-month term – 65 per cent LTV

When: May 2022

Octopus Real Estate completed site finance on a 0.44-acre freehold site in James Street, Dublin, which has planning for a 145-bedroom aparthotel. A lease agreement with an international hotel operator has been signed for the building, due to be completed in 2025. Located opposite the new children’s hospital development, the hotel provides an exciting opportunity to enhance the surrounding area and provide much-needed accommodation.

To find out more about how Octopus Real Estate can support you, contact the team today: https://octopus-realestate.com/contact/

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