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Growing demand for commercial property


For those property investors who are currently operating in the residential market, the reality is that yields from ‘vanilla’ buy-to-let aren’t currently anything to write home about. As a consequence, investors are looking for ways to earn better returns and many are considering commercial property as a more attractive asset class.


While the pandemic may have altered working patterns for good, it hasn’t made the office a thing of the past (even Zoom has now demanded that staff work in the office at least two days a week). Office workers want a thriving high street near them, with stores, cafes and pubs to shop and unwind in.


Thankfully, it appears that politicians have finally woken up to the fact that people don’t want to buy everything online and aren’t willing to see their local high streets fall into disuse. Some actions to be taken include the Levelling Up and Regeneration Bill which intends to put unused and empty buildings in the centres of towns to good use, while another possible action could be to give communities first refusal on assets of community value and long-term vacant high street property.


Yes, the last few years have been tough for the commercial sector, but it’s certainly recovering and demand (and by extension, yields) is strong.



Those property investors who have previously only been involved in the residential market might find that semi-commercial is a good first step. This is where the landlord purchases a property which has both commercial and residential elements; think of a typical property on your local high street, with a flat or two above a shop.


There are many positives with semi-commercial. The investor is splitting their exposure across two sectors, so if one starts under-performing then they also have the cushion of the other, better performing sector. Similarly, having both residential and commercial tenants can help reduce the risk of vacancies, as the property can generate income from both types of tenant and the likelihood of both elements of the investment being suddenly vacant at the same time is low.


Meanwhile, fully commercial investments can provide strong yields in today’s market and at London Credit we see as much demand to finance commercial purchases as we do for semi-commercial. While the market has largely recovered, the message we hear time and time again from investors, landlords and brokers alike is that high street lenders do not seem to have the appetite for commercial property lending that they once had. And even if some appear to be keen, they are taking months to make a lending decision.


That’s one of the many reasons why commercial bridging is in demand. The speed one associates with residential bridging finance decisions equally applies to commercial lending. In addition, lenders will typically offer bridging loans with higher maximum loan sizes than for residential. For example, at London Credit we will lend for commercial or semi-commercial purchase or refinance up to 65% loan to value. (To be classed as semi-commercial, the residential element must account for at least 50% of the value and have separate access.)


Of course, client diversification can be equally beneficial for the broker. The reality is that brokers can’t necessarily afford to just concentrate on one single area of the market these days. Expanding into semi-commercial and/or commercial bridging for the first time can show the broker that these markets aren’t impenetrable; rather, they can be relatively straightforward to understand – especially if the lender looks after the broker and keeps them up to date with where they are with the application and what further information they may need at any given time.


In today’s challenging market, investors are finding better opportunities for strong yields in the commercial property sector. Brokers worth their salt will be helping their clients source commercial bridging finance by partnering with a lender who has both the appetite and track record in commercial lending, while also doing their bit to keep local high streets alive.


Andrea Demetriou, Underwriter at London Credit

Growing demand for commercial property
25 September 2023


BestAdvice fires the questions at Marios Theophanous


At London Credit we have announced a substantial year-on-year improvement in our completion times.


We have increased the maximum LTV on our residential loans from 70% to 75%.


Brokers with clients looking for higher-yielding assets investments should talk to those bridging lenders who operate in the semi-commercial space.