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Commercial real estate mortgage margins: A Pan European study

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  • Hans Vrensen
  • Irene Fosse

Abstract

Loan margins should reflect the risks lenders are willing to accept on the commercial real estate loans they make. Also, having a large scale, stable and low cost funding channel through covered bond issuance or syndication should benefit commercial real estate lenders in providing lower margin lending to borrowers and compete for a larger market share. This study addresses what drives lenders’ loan margins offered on a range of different European commercial real estate loans. Using internal commercial mortgage loan data over the 2012-2018 period substituted with additional data from external sources, we test several possible drivers for loan pricing, such as country risk, collateral risk, borrower business plan and lenders funding costs. With our analysis we try to show that commercial real estate lenders with large covered bond funding programs offer margins that are on average below other lenders, ceteris paribus.

Suggested Citation

  • Hans Vrensen & Irene Fosse, 2019. "Commercial real estate mortgage margins: A Pan European study," ERES eres2019_74, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2019_74
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    More about this item

    Keywords

    Asset Pricing; Commercial real estate lending; Loan Pricing; Wholesale funding;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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