Some new figures show that the commercial property market in the UK may finally be stabilising. After some difficult years, demand for commercial premises is increasing whilst values may be set to rise. However, a sharp reduction in the number of lenders offering commercial mortgage finance has meant that many businesses are still struggling to raise the cash they need to buy commercial premises.
The crash that began in 2008 saw a huge drop in property values, but some new statistics show signs that commercial property values are on the rise. But it seemed clear in the last quarter of 2010 that the market was not going to recover very quickly, as banks were still holding back on commercial mortgages leaving many small businesses unable to buy business premises.
But in the first quarter of 2011, commercial property prices have increased, which went against the anticipated market trend which was expected to continue to fall. This is welcome news to businesses, the public and the Government and is a sign that things are healing, and the commercial property market is now on its way to recovery.
RICS also found that surveyors believe that more commercial property is coming to the market. This is despite reports in late 2010 from Knight Frank who found that a lack of available commercial property in London was leading to sharp increases in property values.
The same story was not being told across the rest of the country however, and the same estate agent confirmed that this was because as the economy begins to recover, regional differences would be extremely clear for some time until the markets catch up with one another.
Even though there are signs that the commercial property market were getting better, commercial mortgages still remained unobtainable for many small businesses who were hoping they may now be able to get onto the property ladder to aid growth within their firms.
A report has recently shown that less than 70% of commercial lenders were actually lending money for the purposes of commercial property purchases. In the last 4 years, almost 40 commercial lenders have withdrawn from the market. Lenders continue to pick the loans that they are comfortable with lending making things difficult for companies to get to where they want to be in terms of expansion.
Although Project Merlin is now in full swing, it would appear that the targets may be unrealistic, considering that many of the commercial lenders are no longer in the commercial markets. This means that the remaining lenders who are still offering commercial mortgages have to work much harder to lend out enough to hit the targets in order to receive their bonuses for this year.
For the foreseeable future, it would appear that growth will be slow, and it may take some time before lenders see the commercial market as less of a risk.
Howard writes for Just Commercial Mortgages the UK’s No1 site for the latest commercial mortgage rates and commercial property finance news.