It has been a rough couple of years for both the UK economy as a whole and the commercial property sector in general, with volatile interest rates and inflation affecting both property prices and rental yields throughout the sector.
Still recovering from economic changes caused by Covid-19, the commercial property sector has had to contend with further instability caused by the 2022 mini-budget and the geo-political complications of wars in Europe and the Middle East, all painting a challenging picture for commercial landlords and investors.
Increasing numbers of employees working from home, consumers preferring to shop online instead of at physical locations, and a desire for greener, more energy-efficient buildings have also been important factors in driving change in the commercial property sector.
Yet, with change comes opportunity. At least, that is what the 500 commercial property professionals, surveyed as part of Cheadle based specialist lender Together’s latest Outlook and Opportunities: The future of commercial property report, are telling us.
The report’s optimistic findings include:
- The commercial property market size is estimated to increase from £90bn in 2023 to £118bn in 2028. That’s a 32% predicted rise in total secured lending.
- A third of professional landlords, property investors and developers expecting to buy more properties in 2024 alone.
- 59% of professional landlords planning to increase rent across their portfolio in 2024.
- The average planned rental rise is expected to be 24% in 2024, helping to bolster rental yields.
While 10% of respondents admitted reservations about the outlook of their business in 2024, a much larger 68% of those surveyed reported feeling optimistic, with a quarter planning to refinance their properties to support business objectives over the next year.
The study also indicates that while 44% of respondents are de-risking and shrinking portfolios or exiting the market altogether (14%), the vast majority are committed to increasing their estate now that inflation has finally returned to below 5%.
The opportunity for specialist lenders
The findings of the report reveal a need for landlords, investors and developers to take advantage of specialist finance. The sector provides invaluable finance in times of austerity when many mainstream lenders’ appetite to financially support projects tends to wane and offers flexible criteria and a speed of service to ensure that opportunities don’t slip away.
Demand is detailed with 42% of all respondents saying they would prioritise using a specialist lender rather than mainstream in the next 12 months, should they require additional financing for commercial property cases.
The top three reasons for this are:
- Specialist lenders are prepared to take greater risk, grant larger loans, and support entrepreneurial plans (39%).
- Specialist lenders are the fastest method of securing funding (29%).
- Specialist lenders provide the best level of service (29%).
With just over two thirds (69%) of respondents anticipating the amount they have to borrow to support their investment strategy will rise in the next 12 months, trusted specialist lenders, like Together, that understand the market and can act speedily and decisively will be invaluable for commercial property professionals looking to capitalise on new opportunities.
For more insights, visit https://togethermoney.com/commercial-market-sizing-report-2024 and download the latest Outlook and Opportunities: The future of commercial property report.
The research was conducted by Censuswide, among a sample of 500 UK respondents (aged 18+) who have taken out a commercial mortgage product in the past – with at least 4 properties in their portfolio. The data was collected between 04.10.2023 – 13.10.2023. Censuswide abides by and employs members of the Market Research Society and follows the MRS code of conduct which is based on the ESOMAR principles.
