In a recent report titled “Opportunities and Outlook; the future of commercial property,” mortgage lender Together reveals that student housing is poised to be the most enticing property investment over the next 12 months. The survey indicates that 23% of landlords consider student housing as the top choice, followed closely by housing developments at 21%, and luxury residential properties at 19%.
Chris Baguley, the Group Channel Development Director at Together, expressed optimism about the prospects of the UK commercial property landscape, emphasizing the impressive scope and diversity of opportunities. Baguley states, “Whether it’s 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 report also forecasts a substantial increase in commercial lending from £90 billion in 2023 to an estimated £118 billion in 2028. Despite a recent easing of turbulence in interest rates, challenges persist in the form of high debt and borrowing costs. Approximately 30% of property developers, landlords, and investors identify inflation as the primary obstacle, with an additional 27% citing high interest and mortgage rates.
Baguley encourages investors to position themselves with the right financial support to capitalize on the anticipated growth in the commercial property market. He states, “The optimism of the sector, combined with the economic recovery, means those investors that are well poised with the right finance support will ultimately be in the best position to capitalize on these opportunities.”
Rob Thomas, an economist and principal researcher at the Intermediary Mortgage Lenders Association (IMLA), acknowledges the adjustment required by commercial property businesses, landlords, and developers in the face of a higher interest rate environment. Thomas notes that, despite short-term challenges, there are opportunities for growth in the medium to longer term.
Thomas comments, “The research we’ve undertaken shows that, while some property professionals are scaling back or exiting the market, the majority are committed to developing their portfolios and many are even taking advantage of the temporary reduction in property prices to expand.”
In summary, the commercial property market appears to be adapting to the current high-interest rate environment, with developers, investors, and landlords showing a bullish appetite for either exiting or diversifying portfolios to mitigate falling yields and revenues. The overall sentiment is one of cautious optimism, with the sector poised for significant growth in the coming years.