The commercial real estate market is expected to have a positive 2022.
The sector is showing signs of growth and investment as it begins to rebound from the negative effects of the global pandemic.
Rising investment, both domestically and internationally, is helping, while a return to office work and increased employment and hiring opportunities are instilling more confidence in market investors looking for new opportunities. better performance.
Overall, investment volumes in the commercial sector reached £57bn in 2021, up 21% on 2020 and slightly above the five-year average, according to Market in Minutes figures. from Savills UK.
Competition returns to the market
A further 10% increase is expected this year as the attractiveness of the UK as an investment destination continues to attract higher demand from overseas investors than before the pandemic. The resilience of global gateway cities such as London is proving more attractive to overseas investors looking to enter the commercial property sector.
Recently, an increasing number of Buy-to-Let (BTL) owners have moved into the commercial space, looking to diversify their portfolios and boost their profits at a time when inventory levels in the residential housing market are at an all time high. historically low. This growth was driven in large part by the supply of higher rental yields and longer rentals associated with commercial properties.
Partnering with a specialist in this field and leveraging their expertise can be a wise approach.
The fact that annual rent increases are often linked to inflation, thereby providing some level of income security for investors, is also attractive, particularly now that many employers are beginning to reassign staff to the full-time office or part-time after closing. of the Covid pandemic.
The return of many businesses and employees to an office environment is also leading to increased investment demands, both at home and abroad. According to the Royal Institution of Chartered Surveyors’ Global Commercial Property Monitor – Q4 2021, repurposing of office space was reported in 87% of cases, with 15% of respondents saying it was happening in significant volumes.
This shift from the traditional layout is driven by demand for more flexible terms and changes the way the workplace is used, with occupants actively looking for ways to make the office safer and more attractive to employees. This includes adapting spaces to accommodate hybrid working, increasing office space allocation, and finding local workspaces.
A growing number of BTL owners have moved into commercial space, at a time when inventory levels in the residential housing market are at an all-time low
In addition, the new permitted development rules allowing the transformation of commercial premises into dwellings, which came into force on March 31, 2021, have made commercial real estate more attractive for investors. They open up the possibility of using commercial buildings as residential space in the wake of the pandemic.
Similarly, many investors, especially BTL residential owners, may find that certain commercial properties are unsuitable for residential purposes, but could nevertheless prove to be good commercial investments, in which case some may be moved to the commercial market without Want it.
Another factor of interest for commercial space is the attractive rates offered to encourage owner-occupiers to use the commercial premises they own, instead of renting them to tenants.
The return of many businesses and employees to an office environment is also leading to increased investment demands, both at home and abroad.
This is particularly relevant post-pandemic, as small and new businesses that have emerged are looking for commercial space. It is also increasing competition between lenders, with service standards being stretched due to increased funding demands, underscoring the growth of the sector.
Overall, continued demand and a healthy supply of commercial properties are supporting market momentum and growth opportunities in 2022 as investors begin to look for other opportunities after two years of stagnation.
Lenders are responding to this demand and competition is returning to the market, which is good news for investors and brokers alike.
Many investors may find that certain commercial properties are unsuitable for residential purposes, but could still prove to be good business investments.
The lending landscape is constantly changing with new rates, products and criteria. It is important for brokers to follow the movements of the market in order to be sure that they are getting the best solutions for their clients.
For brokers who don’t work on commercial deals every day and for those who focus primarily on the residential and BTL markets, partnering with a specialist in this area and leveraging their expertise can be a smart approach. to make the most of new opportunities.
Jason Berry is Group Sales and Marketing Director to Crystal Finance Specialist
This article appeared in the May issue of MS.
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