The commercial property market has seen few years as difficult as 2009 and 2010, the growing number of vacated shopping parades, and empty business parks and offices bear witness to the extent of the recession in this sector. There might be some light at the end of the tunnel however, as indicators suggest a recovery in commercial letting.
As the British economy begins to recover, data from a leading property group has shown that the commercial property market in the UK is showing signs of an upturn. And, with the Government agreeing higher commercial mortgage lending targets, loans and finance to buy property should be more readily available in 2011.
According to new figures from CB Richard Ellis’ monthly UK property index, in the commercial property sector there was a capital growth of 0.3 per cent and a total return of 0.8 per cent in the last calendar month (February). Whilst this is only a marginal increase on the January figure of 0.7 per cent total return, it does establish a small but positive trend.
It is hardly surprising to note that the strongest area of the new recovery was in Central London commercial property. IT was office lets in the city of London that led the recovery with a growth of 1.1 per cent and total returns of 1.5 per cent in February, high above the UK average. More encouraging for the rest of the economy was the fact that the other sector that helped push the figures upwards was retail warehouses, showing capital growth of 0.5 per cent in February 2011.
One of CBRE’s chief analysts, Nick Parker, sees major positives with the retail sector being resilient and performing better than expected in February, a month that was expected to see a drop in the face of the VAT hike and low consumer confidence.
The Institute of Chartered Surveyors have agreed with the recent data after confirming that they have seen a definite increase in not only the amount of commercial properties not only becoming available for sale, but also the amount of investors who are in a position to be able to be able to afford them.
Increased access to commercial mortgages and business finance is also likely to help the commercial property market. A target of £76 billion to small businesses has been set in 2011 – up 15 per cent on 2010. In addition, £11 billion of additional commercial mortgage lending has been agreed for this year as part of the Government’s ‘Project Merlin’ scheme.
There has also been an increase in the value of commercial property in the first few months of 2011 which has pushed more landlords to sell and more potential landlords to buy, which of course has helped the recovery of the market along quite well.
The theory and hope behind all this is it will get start-ups and small firms buying their own property, be it a retail shop, warehouse or even a factory. With the Bank of England base rate still at its historic low, but not for much longer, getting a mortgage now before the base rate and lender rates begin to rise from potentially May at the earliest.
Investors looking to see good returns on their investments could do worse than to consider investing in commercial property. As property prices begin to show signs of a gradual recovery and lenders agree to meet higher commercial mortgage targets, 2011 could be a very important year for the commercial property market.
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Timothy Frodsham writes for Just Commercial Mortgages.com the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.
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