Dislocation in debt markets as a result of regulatory changes such as Basel III and other liquidity constraints are creating opportunities for more flexible nonbank lenders in the European commercial real estate space.

USAA Real Estate’s House View 2022 report on the European market says that the continent now represents significant potential for expansion of debt platforms. The manager argues that alternative lenders are well-positioned to take advantage of lending opportunities arising from dislocations in the capital markets going forward. Bank regulatory changes, including the implementation of Basel III, have reduced appetite among traditional lenders for balance sheet lending, especially for value-add and development financing. As non-bank lending share is now clearly established, the effects of regulation should make it easier for high-performing lenders to break through a historically direct relationship-driven market, given increased broker intermediation.