The last three years have been some of the toughest the UK commercial property market has ever face but could there be light at the end of the tunnel? New data suggesting that the commercial property sector may finally be turning the corner with values set to rise and demand stabilising has been compiled, painting a more optimistic picture. The continued intransigence of the banking sector, however, in limiting the number of commercial mortgages is placing a dampener on the possibility of recovery.
Whilst recent data has shown some signs that confidence is returning to the commercial property market, the lack of commercial mortgages remains a problem for many firms. Despite Government attempts to increase commercial mortgage lending, the lack of access to loans could well hold back any commercial property recovery.
The statistics showed that in the last part of 2010, businesses had no money available in order to help the market grow, as commercial mortgages were unobtainable to many. It was also clear from the figures that commercial property purchases were down.
Further recent data from the institute showed that commercial property sales are on track for an extremely strong first three months in 2011. In a very revealing quote, the study claims that surveyors across the UK have reported that the commercial property sector is heading for its 'best quarter since 2007.' This is the strongest quarter since the beginning of the recession, a promising sign for the government. Nearly a fifth of all those interviewed were optimistic, claiming that activity in the commercial property sector was set to rise with demand likely to be strong over the next few weeks. This is in sharp contrast to the opinions voiced during the last few months of 2010.
The data also seems to defy the rather gloomy predictions about the quantity of available properties. Four per cent of surveyors reported an increase in supply of commercial property, not a decrease. Major property group Knight Frank reported in January that the limited number of commercial properties available in London was resulting in steep rises in the capital's commercial property prices.
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.
In spite of all of these facts and figures being released, many small businesses are still reporting that they are struggling to obtain the commercial mortgages that they need to buy business premises. This is affecting their expansion, but there is hope since Project Merlin's launch.
Natale Giostra, head of European debt advisory at CBRE Real Estate Finance, said: "There are lots of lenders with appetite to lend, but they are being very selective and there will be a lot of cherry-picking in the loans they are willing to make. There is no one bank that is willing to offer every type of loan now." The CBRE report found that only 69 of the 107 UK lenders with commercial real estate loans on their books are still actively lending. That means 38 firms have pulled out of the commercial mortgage market completely since 2007.
The Government's most recent initiative, Project Merlin, was hoped to ensure that banks increased commercial mortgage lending to small businesses. The target for lending in the UK was raised from £66 billion in 2009 to £76 billion in 2011. However, with fewer lenders active in the commercial mortgage market, this target could be difficult to reach.
This situation seems a bit of a 'watch this space' one, as it could go either way. It's still early in the year so the next few weeks will hopefully tell a clearer story.
Whilst recent data has shown some signs that confidence is returning to the commercial property market, the lack of commercial mortgages remains a problem for many firms. Despite Government attempts to increase commercial mortgage lending, the lack of access to loans could well hold back any commercial property recovery.
The statistics showed that in the last part of 2010, businesses had no money available in order to help the market grow, as commercial mortgages were unobtainable to many. It was also clear from the figures that commercial property purchases were down.
Further recent data from the institute showed that commercial property sales are on track for an extremely strong first three months in 2011. In a very revealing quote, the study claims that surveyors across the UK have reported that the commercial property sector is heading for its 'best quarter since 2007.' This is the strongest quarter since the beginning of the recession, a promising sign for the government. Nearly a fifth of all those interviewed were optimistic, claiming that activity in the commercial property sector was set to rise with demand likely to be strong over the next few weeks. This is in sharp contrast to the opinions voiced during the last few months of 2010.
The data also seems to defy the rather gloomy predictions about the quantity of available properties. Four per cent of surveyors reported an increase in supply of commercial property, not a decrease. Major property group Knight Frank reported in January that the limited number of commercial properties available in London was resulting in steep rises in the capital's commercial property prices.
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.
In spite of all of these facts and figures being released, many small businesses are still reporting that they are struggling to obtain the commercial mortgages that they need to buy business premises. This is affecting their expansion, but there is hope since Project Merlin's launch.
Natale Giostra, head of European debt advisory at CBRE Real Estate Finance, said: "There are lots of lenders with appetite to lend, but they are being very selective and there will be a lot of cherry-picking in the loans they are willing to make. There is no one bank that is willing to offer every type of loan now." The CBRE report found that only 69 of the 107 UK lenders with commercial real estate loans on their books are still actively lending. That means 38 firms have pulled out of the commercial mortgage market completely since 2007.
The Government's most recent initiative, Project Merlin, was hoped to ensure that banks increased commercial mortgage lending to small businesses. The target for lending in the UK was raised from £66 billion in 2009 to £76 billion in 2011. However, with fewer lenders active in the commercial mortgage market, this target could be difficult to reach.
This situation seems a bit of a 'watch this space' one, as it could go either way. It's still early in the year so the next few weeks will hopefully tell a clearer story.
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