If you’re currently looking to raise debt to fund the purchase of a real estate asset you’re in luck: the market is currently brimming with liquidity.

But the profile of lenders is changing, and beneath the surface, while it may appear that debt is easier to come by, some are being increasingly stringent in what they lend on. So, who’s currently in the market, and what are they looking for?

WHO'S WILLING TO LEND

The availability of debt capital has definitely improved over the last 12 months, and is likely to strengthen even further, according to various sentiment surveys. This increase in liquidity isn’t necessarily driven by the traditional sources; in some markets, such as in the US and Germany, commercial banks are, on balance, tightening their lending criteria on commercial real estate assets. Instead, it’s alternative providers who are ready and willing to discuss terms, and institutional investors – pension funds and insurance companies in particular - are at the head of the queue.

These institutional investors have been very active in the global real estate debt markets in the US and ​​parts of Europe for some time but are now increasing their activity in some ​​mature Asia Pacific markets, most notably Australia. ​And, importantly, they’re looking to grow their exposure: the results of INREV Investment Intentions Survey 2025 indicate that 44% of institutional investors expect to further increase allocations to private debt funds in Europe over the next two years.

Why is this type of lender now favouring debt strategies? While oft-quoted reasons, such as a stable and predictable flow of income, and diversification from other strategies, remain valid, it comes down to the returns on offer. Simply, in a world of higher interest rates and rebased property values, debt lending now offers attractive risk-adjusted returns to investors.

A MORE DISCERNING MARKET?

However, just because lenders have the capacity to lend doesn’t mean they will. The money may be there, but in many geographies we are still in an environment of lower than average transactions, so opportunities to deploy are limited. When they do arise, the competition to lend is fierce, but only on the best assets – those without a strong tenant covenant or other robust fundamentals may find finance much harder to come by. On the best assets, however, borrowers can expect to almost have their pick, with an array of flexible and favourable terms on offer.