International real estate advisor Savills has this week released its list of top lenders for 2010. Its analysis reveals an encouraging re-emergence of residential development lending indicating a potential revival of commercial development finance.

Savills suggests that London's City office market could be the first to benefit from a move by lenders towards commercial development finance as a lack of new stock is forecast to trigger a potential 8.6% annual rental growth over the next five years. The firm reports that only 11 schemes are currently on site and set to complete over the next four years totalling 1,440,000 sq ft (133,776 sq m), of which 994,881 sq ft (92,424 sq m) is committed by prelets. Furthermore, this figure represents 800,000 sq ft (74,320 sq m) of new supply per annum over the next four years against a long term average* of 3.1 million sq ft (287,990 sq m) per annum.

William Newsom, UK Head of Savills valuation, says: "In the 1990s the development finance markets were closed for half a dozen years. In this cycle we have seen markets reopen again after only two years, albeit on cautious terms and predominately for residential stock. Traditionally commercial development finance follows the residential markets and the prospect of kick-starting these developments is extremely encouraging for areas that look set to experience a shortage of quality supply. We are already hearing lenders say that they will lend against prelet commercial development. I believe it is only a matter of time before we see such deals closed."

Peter Thursfield, Director of Savills City Agency, adds: "We are seeing clear signs of recovery in the City market this year. Vacancy rates have already fallen and office rents have risen by about 10% over the last six months. An increase in debt finance for quality developments will be welcomed in the medium to long term."

The following developments are set to complete over the next four years:

2010 Completions

• St Botolphs, 138-139 Houndsditch, EC3
• Riverbank House, 2 Swan Lane, EC4
• 95 Gresham Street, EC2
• 40 Gracechurch Street EC3
• 1 New Change, EC4
• Angel Building, 406 St John Street, EC1

2011 Completions

• Heron Tower, 106-126 Bishopsgate, EC2
• Cannon Place, 78 Cannon Street, EC4

2012 Completions

• Shard, London Bridge, SE1

2013 Completions

• London Bridge Place, 25 London Bridge Street, SE1
• The Pinnacle, 24 Bishopsgate, EC2

Editors notes:

• Savills long term average is calculated between 1985 and 2009.