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Commercial Property Outlook 2024

Those operating in the commercial property market have had to deal with challenging conditions over the past few years. The market has never recovered fully since the onset of the pandemic, with economic factors such as high inflation and the cost of living adding to the issues brought about by Covid, such as changing employment patterns and mobile/hybrid working.

That said, while 2024 isn’t predicted to be a bumper year for investors, it is forecast to be a year of continued recovery, with some definite growth areas. It also appears that it will be a good time for those looking to expand their portfolios, as others may be forced to exit the market due to being over-leveraged or needing to raise money to deal with other financial concerns.

 

Window of opportunity

According to Colliers’ UK Property Forecasts 2024 Report, the first half of 2024 will see the domestic commercial property market enter an ‘opportunistic’ phase. It cites mounting numbers of landlords needing to refinance, as well as significantly greater debt costs starting to bring increased volumes of product to the market. Colliers expects that a reduced level of leverage compared to previous cycles means the phase will be ‘orderly’, and also believes that when the Bank Rate is finally reduced by the Bank of England’s Monetary Policy Committee (MPC) – possibly in May or June – this window of opportunity will close.

The report also notes that the rental growth outlook will remain strong, and investors will focus on income return rather than capital appreciation throughout the year. Meanwhile, Colliers expects demand to stay robust for development sites that are priced “sensibly”, as the existing supply pipeline starts to dry up towards the end of the year.

In addition, student accommodation will attract those investors switching to ‘beds’ or ‘living’ because of what Colliers calls its “defensive and transparent nature”. “Barriers to market entry (difficult planning system and high development costs) will mean operating assets will remain highly sought-after as sources of stable income producing investments,” it notes.

There are numerous other reports signifying greener times ahead, but I will just note a simple reference from another report, from Kalmars, which expects the commercial property market recovery to continue in 2024, “albeit at a slower pace than in 2023”.

 

Enter Bridge Loans..

At London Credit, we help many brokers whose clients need funding for commercial property investments, especially as the appetite of high street lenders towards commercial property lending isn’t what it was pre-pandemic.

Commercial bridging can be almost as fast as residential bridging finance. It is ideal for those who want to take advantage of the predicted ‘opportunistic phase’ in the first half of 2024, so brokers should ensure they talk to their clients about their commercial property plans in the new year.

Simon Michael, Operations Manager at London Credit

Commercial Property Outlook 2024
4 January 2024

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