MIp35_0110:MI 12 Jan 15/12/2009 14:24 Page 3
Commercial Finance Introducer
35
Confidence is key
Stephen Johnson, sales and marketing director at
Commercial First Mortgages, looks at the year ahead
for the commercial sector
W
ill 2010 bring better market The increased interest in these properties - only need to borrow at relatively low LTVs.
conditions and more mainly from overseas buyers – has been Borrowing rates are now on average 3.5 per
opportunities to grow business boosted by the weak pound and the chance of a cent over base (Bank of England), compared
than we have experienced over bargain purchase, as London’s property prices with previous margins at 1 per cent – 2 per
the last couple of years? adjusted very rapidly (downwards) in the cent over base, and development funding has
Seeking answers to this question, a key factor recession. There are vendors looking to raise become particularly scarce and expensive. It is
is how far confidence in the underlying capital and investors keen to purchase at a price hard to foresee any reduction in pricing (and
performance of the commercial property that works for both parties. This alignment will associated fees), or relaxation in qualifying
market revives. Market data for commercial certainly drive activity, and as interest rates criteria.
property relates purely to the investment remain next to zero the investment returns on Given these continuing market conditions,
market and is analysed across three key sectors; strong office properties are very attractive. what can broker firms do to give themselves the
office, retail and leisure, which is where we best chance of improved income in 2010? One
need to look for the first signs of recovery. Optimism key action is for commercial brokers to work
Recently published data is starting to show their existing clients harder and identify the
Retail some grounds for optimism in 2010. IPD – the other needs that exist within their business or
In the retail property market, the larger global provider of data on commercial personal lives, rather then relying on just one
shopping centres are bucking the trend, and the property performance – has reported a positive product. We are practising what we preach at
very recent Westfield site in West London has capital growth of 1.5% in the third quarter of Commercial First as we recognise the need for
outperformed occupancy expectations. 2009. This is the largest quarterly figure since our own business to evolve. Consequently we
Nevertheless, the failure of household names Q4 2006, and is a 5.6% improvement over Q2 have launched a commercial broker
such as Woolworths, Allied Carpets, Boarders 2009. In addition, Reita (the trade body and partnership – Commercial First Partners (CFP)
etc have left large retail premises on the market information source for property investment - to complement our future lending activity.
and largely still unoccupied. Other factors - for companies) conducts regular research among The partnership brings together a national
example, the shift into retail parks and prime IFAs and its latest results (October 2009) show group of professional brokers, consolidating
locations, and the growing role of internet that 60 per cent of IFAs believe property prices activity to create a volume distributor of
based shopping - indicate a drawn out and will increase over the next twelve months, commercial property and business finance
painful recovery for retail property. compared with just 24 per cent in the previous products. Our partners are supported by
quarter. central marketing, IT and sales teams as well as
Leisure Aside from the property investment sector, field based development managers. We have
In the leisure sector, there is also little sign of the owner occupied market is much harder to established relationships with several lenders
recovery. Debt reduction strategies remain a read, with little or no available data. and providers to offer a range of products - not
key commitment for a large number of the pub Anecdotally this part of the market remains all of which are dependent on credit to make a
companies, who continue to sell many sites. depressed as it depends upon business being sale. For example, we can give brokers access
Hotels and restaurants are likewise suffering confident enough to expand or commit capital for their clients to business finance planning
from the wider economic malaise, which is to what is a fairly illiquid asset. services, including maximising use of tax
flushing out the poorer operators. The over- effective strategies such as capital allowances.
supply of these sites is likely to depress values Funding I am optimistic that lending appetite will
and sentiment. What may 2010 bring in terms the availability slowly begin to improve, but there are not
of commercial mortgage funding? Currently, going to be major changes in 2010. This means
Offices commercial mortgage deals are being offered to that trying new ideas with existing clients and
The office property sector shows more signs of the best quality applicants – for example being willing to adapt to new ways of doing
life – but recovery seems to be largely confined experienced operators who can demonstrate business will become a necessity if advisers
to premium office space in Central London. performance during the recession and who want to grow activity in the New Year.
www.mortgageintroducer.com January 2010 Mortgage Introducer
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