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Commercial is investment

The ability to lend is closely tied to capital markets business, writes Laurence Neville

Catella: How smaller players can survive

THE REAL ESTATE market is changing rapidly. Ownership of property is shifting from the users of the property to investors thanks to a wide range of financial reforms. Unsurprisingly, the banking world is also reconfiguring itself to come to terms with these changes. Euromoney's real estate survey confirms that many of the top players in investment banking are also active in commercial banking – a substantial change from the past.

In property, the relationship between clients and commercial banks was traditionally straightforward. Clients needed capital and commercial banks needed exposure to the property markets. But about 10 years ago, that relationship began to change with the introduction of financial reforms that spurred a huge change in how property is bought, sold, managed and considered as an asset.

Property is now treated by investors as an asset like bonds or stocks and therefore exists for them solely as a source of maximum returns. The dramatic growth of the commercial mortgage backed securities (CMBS) market and the introduction of real estate investment trusts (Reits) across the world have made property investment as convenient as buying a stock.

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