Refinancing could affect European property.

The Financial Times this morning reports that up to £600bn of loans made to commercial property borrowers by banks and other financial institutions will require refinancing within the next two years across Europe, a situation which could spark a crisis in the industry as lenders take a tougher line on extensions and renewals.

A study of outstanding real estate debt by Navigant, the US advisory firm, has suggested a debt crisis is set to hit the commercial property industry in the UK and Europe.

It also suggested that between £500bn-£600bn of commercial property loans will mature in the next two years, many of which have already been extended once by banks not previously able to take writedowns from demanding money back from problem borrowers.

Navigant predicted that increased delinquency rates plus ballooning maturities on these loans would compel banks in the UK and Europe to jettison commercial real estate holdings.

The number of loans scheduled for maturity is set to double in the next few years, which it said would come as the strength of the collateral from the property underlying those loans falls precipitously.