The Coronavirus pandemic has significantly impacted the commercial real estate industry. This has naturally affected the demand for commercial bridging finance and how investors are approaching commercial assets in the UK property market.
As we know, the spread of the virus has prompted multiple lockdowns over the past 14 months. Social distancing rules have remained in place throughout. Offices were left empty when advice was to work from home. Shops were forced to close, and hospitality venues have had to rely on outdoor spaces and takeaway services only. Investment into commercial property did fall as a result. During the first lockdown from March to July 2020, around £5 billion of investment went to commercial real estate. That is less than a quarter of the amount typically seen over the past five years.
However, evidence is starting to suggest that the market has turned a corner. March 2021 saw £3 billion invested into commercial properties in Britain in that month alone. This reflects how the UK economy is sparking back into life, as society begins to return to its pre-pandemic ways.
Shutters are lifted
The success and speed of the vaccine rollout has allowed the Government to relax social distancing rules. At the beginning of April, non-essential retail venues opened for the first time this year. This, in turn, has meant that local high streets and city centres were able to open their doors once again. Within a week of this change, British Land reported that 79% of its stores were open.
Source: British Land
Restrictions are due to lift once again in under a week’s time. This will see restaurants, pubs and cafes open their doors to inside dining. Social distancing and the rule of 6 (or two households) will be set in place. The industry is expecting to see an increase in footfall in reaction to inside dining. This will provide a much-needed positive boost for the hospitality industry. With more people milling around UK highstreets to socially connect over lunch and dinner, this could also re-ignite interest in the retail industry.
Throughout April 2021, government data has also shown that more UK adults are leaving their homes for work. It suggests that office working will slowly become more normal for organisations in the months to come.
- With the increased likelihood of company’s searching for commercial assets to rent, now could be the optimal time to purchase or renovate an office building. If you’re looking to increase your asset’s appeal, a business bridging loan could provide you with the funds you need.
- You can find more information on our commercial bridging loan page.
As noted, the result of these positive trends has been an increase in property investment in the commercial sector. This has come as the Bank of England revised its forecasts for the UK economy, painting a more optimistic picture of the post-pandemic recovery.
Demand for commercial property
There are many interesting opportunities in the commercial market for property investors. Most obviously offices, retail premises and hospitality venues are all likely to become more popular again as business demand for such spaces increases in the second half of 2021.
Warehouses are another area experiencing high demand. The pandemic has created a sharp rise in online shopping. Online sales represented 36% of all UK retail transactions in January this year. That is almost double the 20% recorded in the same month of 2020. As a result, large warehouses and logistic units are becoming highly sought after. For example, grade “A” warehouses (those with over 100,000 square foot or more of space) achieved record rents in 2020.
Semi-commercial properties are also attracting investors’ attention. With the property market as a whole in a cheerful mood, we’ve noted an increased interest in the semi-commercial sector over recent months. Investors are clearly considering ways of diversifying their property portfolios.
How can bridging loans help
Along with the demand for development exit loans and larger bridging loans, we have noticed rising interest in commercial real estate. In 2020, clients looked to convert commercial units into residential properties, when the pandemic first took hold. Now, investors are considering purchasing commercial assets to either rent or refurbish and sell on. This holds positive undertones for the future of the commercial property market.
Fast, flexible bridging loans can help property investors in both the residential and commercial markets. We have dedicated funding lines to fund large loans projects, such as buying commercial property. To find out more about how we can help, you can see some of our past commercial case studies here.
You can also visit our bridging hub for more information about the bridging loans we offer.