Plans for the construction of new London offices may have to be shelved due to nervous bank lenders and the dismissal of loan requests.
Earlier blueprints for development were postponed at the start of the recession in the hope that projects would be kick-started once the economy improved. However, lenders are wary of the potential risks and unwilling to speculate about the reported upsurge in property interest.A UK senior banker said “It takes hundreds and hundreds of millions of pounds to build some of these schemes but I can’t think of any banks willing to contemplate development loans in excess of 75 million pounds.”
Capital adequacy rules mean that banks are unable to take part in risky development lending without a number of pre-lets already in place. This means developers may not be able to continue with their plans to reap the benefits of the improvements in the market predicted for 2011.
Pundits say landlords are set to do well from the rise in growing new businesses once economic recovery begins – flourishing companies would require an expansion of office space. But without a serious injection of capital developers will fail to cash in on the upturn.