Despite the ongoing challenges of high interest rates, two thirds (69%) of property developers, landlords and investors in the UK anticipate the amount they must borrow to support their investment strategy will rise in the next 12 months.
The research from property lender Together surveyed 500 property specialists who had taken out a commercial mortgage in the past. The data suggested that commercial lending could rise by 32% in the next five years.
Rob Thomas, economist and principal researcher at the Intermediary Mortgage Lenders Association (IMLA) said: 'In the short term, while inflation is coming back under control, the higher interest rate environment will take some adjustment for commercial property businesses, landlords and developers – including de-risking portfolios and diversifying into new growth sectors.
'However, for those looking for growth in the medium to longer term there are opportunities across the sector this year onwards. To put it in perspective, total secured commercial lending is predicted to rise by 32% from an estimated £90 bn in 2023 to £118 bn in 2028.'
Diversification plans
Investors also plan to broaden their investment types to mitigate falling yields and revenues.
Among all respondents, almost a quarter (23%) said student housing offered the most appealing property investment opportunity over the next 12 months. This was followed by housing developments (21%) and luxury residential properties at 19%.
While 29% of property investors surveyed are aware falling property values may make securing lending difficult this year – it’s not preventing the majority from capitalising on emerging growth sectors. Nearly one in five (18%) of property investors surveyed are most excited to pursue retail projects this year, followed by housing developments (17%) and student accommodation at 16%.
For all respondents, office space (17%), hotels (15%) and industrial or manufacturing sites (13%) trigger the most hesitancy when considering potential commercial market opportunities this year.
Plans to derisk
A further 44% are planning to de-risk and shrink their property portfolio over the next 12 months. Around half of those who are planning this (48%) will do this in the next three to six months, with about a quarter (23%) planning on doing it sooner.
While long-standing funding barriers and high interest rates continue to block access to the market for some - with 22% of all respondents not confident1 about being able to access additional finance if they needed to - Together’s report makes evident the scale of the opportunity across the UK for property entrepreneurs.
Chris Baguley, group channel development director at Together, commented: 'As we look at the UK commercial property landscape, the scope and diversity of the opportunities is impressive. Whether its student housing, housing/residential development or repurposing retail and other larger sites, the next few years are going to provide significant growth for the UK commercial property market.
'The optimism of the sector, combined with the economic recovery, mean those investors that are well poised with the right finance support will ultimately be in the best position to capitalise on these opportunities.'
