$30 billion a year. This is the current estimated funding gap that non-bank lenders are filling in the commercial real estate market as traditional lenders move to the sidelines.
Each year, over the next ten, this number is expected to grow in line with a shifting market share. Australia’s big banks, which currently occupy 85% of the $270 market, could slip down to a 70% share. Doors are being flung open as many non-traditional sources of capital are finding more commercial projects.
The shift is reflective of the current state of residential real estate funding, where non-bank lending has been in consistent growth.
"We're at the start of a structural change," Qualitas head Andrew Schwartz told The Australian Financial Review. "The gap in the market is currently around $30 billion and it's growing. I feel in a decade you may see the banks' participation rate – market share – at 70 per cent, which is still above the UK and the US."
The UK and US commercial real estate markets present a market share of 50-60% in favour of their big banks. While Australia may be tens of years away from a similar state, the big banks are reducing their lending despite the fact the sector is in growth.
"Not only is the bank market share coming down, but it's coming down in a market that is growing by 3 per cent per annum," Mr Schwartz said.
As the big banks give up market share, astute capital firms are taking advantage of the scope. Mr Schwartz has found that in recent times, non-bank lending is becoming increasingly common for ‘normal’ projects; it’s not just the ‘difficult to fund’.
"There's a lot of very normal debt transactions to be done in a market where banks are giving up market share and it needs to be met from alternative sources," Mr Schwartz said.
"They don't need to be situational. It's just everyday commercial lending opportunities that are there."