Commercial landlords more optimistic despite economic headwinds - lender

Despite inflationary and mortgage volatility over the last 12 months, a mortgage lender claims over a third of commercial landlords are gearing up for expansion in 2024.

Indeed, while 10 per cent of all respondents to the survey by Together admitted reservations about the outlook for 2024, 68 per cent feel optimistic, with a quarter planning to refinance their properties to support business objectives over the next year.

The findings come ahead of the launch of a new report by Together featuring an outlook on the commercial sector for the next three to five years: it indicates that while 44 per cent of respondents are de-risking and shrinking portfolios or exiting the market altogether, the vast majority are committed to increasing their portfolios now that Q4 2023 saw inflation finally return to below five per cent.

More than half, 58 per cent of all respondents would recommend others invest in the UK commercial property market now despite the events of the last year. This comes as 42 per cent of have seen an increase in revenue in last 12 months.

While 16 per cent of commercial landlords are exiting altogether, doors are being opened for a new generation of professional landlords and developers to step in. Regionally, those surveyed in London, West Midlands and in the Northwest of England will be buying more properties over the next year. And not all are entering the commercial market via traditional routes, 10 per cent of all respondents admitted they were influenced by social media and property influencers seen online.

There is an undeniable opportunity 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 the demand is shown in Together’s study, with 42 per cent 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, they are the fastest; and they provide the best level of service.

However, government support is a crucial part of the puzzle to be able to address the current lack of stock, allowing developers and investors to realise their expansion plans from next year onwards.

The Treasury’s pledge to remove the red tape surrounding planning applications is vital to improve time delays, but there are other factors inhibiting growth, including labour shortages in the construction industry. Ahead of a new political year, Together’s research found one in five UK property professionals are keen for the Government to address the major skills shortage within the building trade as a priority, with 18 per cent wanting a review of rising costs for materials and labour.

The survey’s creator - Rob Thomas, cconomist and principal researcher at the Intermediary Mortgage Lenders Association - says: “The improving outlook we can see in our macroeconomic forecast, coupled with supportive structural factors such as rising population and constrained supply due mainly to planning constraints, allows for a recovery in property prices and markets from 2025, picking up momentum from 2026 onwards. This in turn supports a recovery in lending to these markets despite what has been a tougher financial environment.”

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