Commercial property market slowing down but future is bright

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The amount invested in commercial properties has fallen this year, but investing in commercial property remains a sound decision.

During the months from January to May, £16.9bn was invested in commercial property, but this compares to £33bn for the same period in 2015.

Some analysts blame the decrease on uncertainty about whether Britain will stay or leave the European Union. Another reason for the decrease in investments could be the drop in value of rental income from 8.7% to 6.6%.

The United Kingdom property market has had enormous growth in the last five years. Industry experts such as Peter Cosmetatos, of the Commercial Real Estate Finance Council of Europe, believe that the market is stabilising and entering a period of balance. Cosmetatos said:

“After the summer last year, loan-to-value ratios stopped rising, interest cover was no longer falling and margins were stabilising. That’s a sign of a more balanced market. Lenders are thinking about risk in a more strategic way.”

Though the London commercial property market is down, many regions of Britain are still experiencing a vibrant market. Larger property investors are less active and this has opened opportunities for smaller investors, with many properties being sold at discount prices outside London.

There are still plenty of lenders proving commercial mortgages for commercial property and buy-to-let investors. Whatever Britain’s future status in the European Union, rental incomes for commercial properties are not expected to fall.

Financial Times

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