View more on these topics

The firms most at risk from commercial property fallout


Royal Bank of Scotland and Lloyds Banking Group have the largest exposure to UK commercial property risks, according to Moody’s.

The rating agency’s investor service report says it expects the commercial real estate sector to weaken post-Brexit vote.

Moody’s says large UK banks are better placed to handle this risk than during the financial crisis.

Moody’s senior vice president Andrea Usai says: “We estimate that the six largest UK banks have reduced their aggregate gross UK commercial real estate lending exposure by around 40 per cent, to £84.6bn at end-June 2016 from £138.9bn at the end of 2010.”

RBS and Lloyds have exposures of £25bn and £20bn respectively.

Santander UK has the largest exposure as a proportion of capital at 94 per cent.

Usai adds: “Pressures on the UK commercial real estate market mounted in early 2016 amid uncertainty about the outcome of the Brexit referendum.

“Following the acutal vote to leave the EU, we have seen the collapse of some large commercial real estate deals, as well as the suspension of redemptions at some UK property funds – these events signal a sharp change in investor sentiment.”

Moody’s says a severe stress test would erode bank capital despite their protective measures.

Moody’s base-case scenario would see average UK commercial property values fall by up to 10 per cent depending on type, quality and location.

If the stress test involves a UK recession then Moody’s expects losses of up to £12bn across the six largest UK banks, making up 14 per cent of their property exposure.

But the rating agency says these firms should be able to offset some of their credit losses through “profits and other management actions”.



Aviva to suspend property fund for up to 8 months

Aviva Investors expects the suspension of its £1.8bn Property Trust to last for up to eight months. In a note sent to investors today, the group said the decision on the timing reflects the time it takes to sell commercial properties. The note says: “It is our intention to re-open the trust for dealing as soon […]

Aberdeen Gilbert Martin Gilbert 700x450

Aberdeen sees £1.5bn outflows from property fund

Aberdeen Asset Management has seen £8.9bn of net outflows in the past quarter, including £1.5bn coming out of its property funds. In a trading update, published today, the asset manager saw the largest net outflows from its equities division, with £2.9bn leaving the strategies. Multi-asset followed with £1.7bn of net outflows in the three months to the […]


L&G eases Brexit discount on UK property fund

LGIM has increased its fair value pricing adjustment on its £2.3bn UK property fund 5 per cent as conditions in the sector show signs of stabilising after the Brexit vote. The L&G UK Property fund now has fair value pricing of negative 10 per cent, compared to the negative 15 per cent it introduced in […]


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. These sums are insignificant frankly. If the owners/businesses have viable businesses and are paying the bills – interest and repayment, then there is little risk. The yields are not inequitable at present and prices not too high ‘generally’.

    Where the biggest risks lie are in resiudential property. Now, would you or Moody’s like to do a similar exercise for residential borrowing and also borrowing for speculative residential developments?

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm