January 16, 2024 10:27 am

Insert Lead Generation
Nikka Sulton

Despite facing challenges such as inflationary pressures and fluctuations in mortgage rates over the past 12 months, a recent survey conducted by Together, a mortgage lender, reveals a noteworthy trend among commercial landlords. Surprisingly, over a third of these landlords are actively gearing up for expansion in 2024. This resilience is indicative of a positive outlook within the commercial property sector.

While 10% of survey respondents expressed reservations about the economic landscape in 2024, a substantial 68% are notably optimistic. This optimism is not merely confined to positive sentiments but also translates into actionable plans, with 25% of the landlords intending to refinance their properties. This strategic move is aimed at supporting their business objectives over the next year, showcasing a proactive approach among commercial property stakeholders in navigating the challenges and opportunities that lie ahead.

The impending release of Together’s forthcoming report on the commercial sector’s outlook for the next three to five years brings forth intriguing insights into the current landscape. This report highlights that, in response to the economic shifts witnessed in the last year, a substantial 44% of surveyed individuals are strategically adopting de-risking measures. These strategies involve either downsizing their portfolios or making a strategic exit from the market. However, despite the cautious approach taken by some, a predominant majority is expressing confidence in the market’s potential, with plans to actively expand their portfolios. Notably, the recent return of inflation to below five percent in Q4 2023 appears to be a contributing factor to this renewed optimism.

In the face of the challenges encountered over the past year, a resilient 58% of respondents are not only optimistic about the market but would also recommend others to consider investing in the UK commercial property market at this juncture. This positive sentiment is further underlined by the financial performance of a significant portion of participants, with 42% reporting a notable increase in revenue over the last 12 months. These encouraging signs suggest a prevailing confidence in the resilience and growth potential of the UK commercial property market, notwithstanding the economic headwinds faced in recent times.

As 16% of commercial landlords make their exit, this trend creates an opening for a new wave of professional landlords and developers to enter the scene. The shift in the landscape is not only marked by departures but also by the emergence of opportunities for a fresh generation of property stakeholders. Regionally, individuals surveyed in key areas such as London, the West Midlands, and the Northwest of England are strategically positioning themselves to acquire more properties in the upcoming year. This regional focus highlights the diverse dynamics within the commercial property market as it responds to changing trends.

Interestingly, the entry into the commercial market is not uniform, with a noteworthy 10% of all respondents admitting to being influenced by social media and online property influencers. This unconventional pathway indicates the evolving nature of information dissemination and decision-making within the industry. As the digital realm plays a role in shaping perspectives, it adds a layer of complexity to the traditional routes into the commercial property market. Amidst these shifts, there is a growing recognition of an undeniable opportunity for landlords, investors, and developers to capitalize on specialized finance. Particularly in times of austerity, when mainstream lenders may exhibit reduced enthusiasm for financially supporting projects, the sector of specialist finance emerges as a valuable resource for those seeking funding for their ventures.

In Together’s study, 42% of respondents express a preference for utilizing a specialist lender over mainstream options in the next 12 months for additional financing in commercial property cases. The primary reasons cited for this inclination include the willingness of specialist lenders to undertake greater risk, provide larger loans, support entrepreneurial plans swiftly, and offer superior service.

While specialist lenders play a crucial role in meeting the demand, government support is identified as a vital component to address the current shortage of stock, enabling developers and investors to actualize expansion plans in the upcoming year. The Treasury’s commitment to streamlining planning application processes is seen as a pivotal step to alleviate time delays. However, obstacles to growth persist, including labor shortages in the construction industry. As the new political year approaches, 20% of UK property professionals emphasize the need for the government to prioritize addressing the significant skills shortage within the building trade, with 18% advocating for a review of escalating costs for materials and labor.

Rob Thomas, economist and principal researcher at the Intermediary Mortgage Lenders Association, the entity behind the survey, underscores the improving macroeconomic outlook. He highlights supportive structural factors like a rising population and constrained supply due to planning constraints, foreseeing a recovery in property prices and markets from 2025, gaining momentum from 2026 onwards. This optimistic trajectory, coupled with a resilient lending environment, reflects the resilience of the property sector in the face of recent financial challenges.

 

 

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