The Right Time to Invest in Commercial Property? Why It's Right Now!
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.
Various rating and monitoring indexes from February showed an upswing within the commercial property market. Now for the stat porn, which shows a 0.8% return and 0.3% capital growth, a surprising upwards trajectory as January's figures continued a slow and steady declining that was expected to continue.
Central London offices led the recovery with a capital growth of 1.1 per cent and total returns of 1.5 per cent in February. Another sector that helped nudge the figures upwards was retail warehouses, which showed a capital growth of 0.5 per cent in February 2011.
With both the retail and office sectors showing improved results, and industrial the only sector which saw slightly weaker returns, February's property market performance in the UK was generally more encouraging than what was seen last month. That's the view of Nick Parker, Senior Analyst at CB Richard Ellis who published the data. Mr Parker continued: "Perhaps the most positive story is the resilience being shown in the retail sector, with all three sub-sectors producing stronger than anticipated returns, despite concerns surrounding the strength of the consumer economy."
CBRE's figures back up other recent date from the Royal Institute of Chartered Surveyors (RICS). 18 per cent of surveyors questioned recently said that they expected activity in the commercial property sector to increase in the next few weeks whilst many others believed that commercial property was set for its 'best quarter since 2007'.
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 been an increase in commercial lending in 2011 already. An additional £1.1 billion has been secured by industry from lenders already in January 2011, which is an increase, annualised, of 3.6 per cent.
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.
In spite of the good news that the commercial property values and commercial mortgage sales are rising, it is still important to remember that interest rates are set to increase in the near future which will cause the mortgage costs to increase.
About the Author
Timothy Frodsham writes for http://JustCommercialMortgages.com the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.
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