A recent press release from Jones Lang LaSalle claimed that volumes for office investment in central London totalled £17.9 billion in 2013, up by 16% on the previous year’s £15.4 billion.

The figures grabbed my attention as they were published within a few days of a speech given by Andrew Haldane, executive director, financial stability, at the Bank of England - he was addressing the Bank's Commercial Property Forum, which in its 20 year history has brought together developers, investors, lenders, occupiers, surveyors, auctioneers, researchers and regulators to discuss developments in the UK's commercial property sector.    Describing today's environment as a "slow recovery from a jarring commercial property bust" with prices currently 37% below their peak, Mr Haldane suggested that a "long wave of rising commercial property prices, deeper liquidity and rapid and, in many cases, imprudent lending practices" were to blame.

Fair enough, and as we all know, on this occasion developers and investors have not just been left licking their wounds but in some cases requiring life support.

In this month's Lead Taker I am putting forward a few ideas of my own as to why commercial property lending has been so unsuccessful for UK banks.

My first suggestion is that there has never been enough risk capital floating around the country as a result of which banks are always looking for bricks and mortar when they are lending against machine or process. But this reliance made a bad situation worse in the recession, partly because lenders failed to grasp the fact that if the client can still pay the debt, there is no problem with a 37% drop in commercial property values!

As in the stock market, short-termism has also been a major problem, as witnessed by too much attention being paid to a company's share price when a commercial finance package is struck, resulting in bricks and mortar being used as a backstop.

Turning to SMEs in particular, property can snuffle up large part of value: for example when pickle manufacturer, Branston, was sold, commercial property accounted for only 5% of the sale price but this is not the case with smaller firms, which tend to be generational. At this end of the market, I believe lenders could be paying more attention to life cover so as not to be exposed at the demise of the owner.

Also, while specialist property teams are generally only found in corporate banking, elsewhere there is strong reliance on external valuers who come with a variety of skills and experience.

I am not suggesting we need more specialist property teams but I do think managers lending to SMEs need to be better informed. This could be done easily enough by, for example, drawing up a training initiative with the RICS that could be sold into banks; bankers and valuers turning up together to assess a property is another refreshing idea.
 
Managers could do more checks such as re-visiting properties where funds have been provided for refurbishment and making sure they have gone beneath the surface - anybody can smarten up a front door and a reception area.

This doesn't have to come across as an inspection regime, just good practice and an opportunity to reinforce good customer relations. It is, after all, in a bank's interest to check that property-based security is kept in good condition and to help out when it comes to necessary repairs. The alternative has resulted in commercial property falling into disrepair and being sold for sixpence at auction while aggressively driving down market values.

When lending to SMEs, banks could engage with the knowledge held by the broker community regarding commercial property and with property entrepreneurs who have made serious money in the sector.

There is plenty of valuable knowledge out there that banks don't use, preferring instead to take a modular, sector bound view - this asset good ... that asset is not.

So here is my New Year's message to major banks - don't withdraw from commercial property but address the educational issues and remodel to make sure it is profitable.

After all, specialist lenders in the sector have been doing just that for decades.

Finally, have included a couple of charts compliments of the Bank of England. I think they make interesting reading and also back up my case - recent blows to commercial property prices could have been lessened if lenders had revamped their ideas models - but I will leave it to you to make up your own mind.