Commercial property lending is set to rise by 32 per cent within the next five years, a new study has found.
According to research carried out by property lender Together, total secured commercial lending will be worth £118bn by 2028, up from an estimated £90bn in 2023.
Furthermore, almost a quarter (23 per cent) of property professionals said that they are looking to diversify their portfolios and expand into new sectors.
Together found that debt and the cost of borrowing continues to be at peak levels, with property developers, landlords and investors citing inflation and high interest rates as the biggest challenges this year.
23 per cent of property investors said that student housing offered the most appealing opportunity over the next 12 months. This was followed by housing developments (21 per cent) and luxury residential properties (19 per cent).
“As we look at the UK commercial property landscape, the scope and diversity of the opportunities is impressive,” said Chris Baguley, group channel development director at Together.
“Whether its student housing, residential development, or repurposing retail and other larger sites, the next few years are going to provide significant growth for the UK commercial property market.
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“The optimism of the sector, combined with the economic recovery, mean those investors that are well poised with the right finance support will ultimately be in the best position to capitalise on these opportunities.”
More than half (52 per cent) of commercial landlords, investors and developers said that they feel specialist lenders are best equipped to deal with their particular lending needs.
Meanwhile, more than two thirds (69 per cent) of respondents believe they will need to increase their borrowing to support their investment strategy in the next 12 months.
Overall, demand for new property lending is high, with 23 per cent of all respondents saying that the commercial market is only improving and there are far more opportunities.
18 per cent said the opportunity to generate more money is high and 16 per cent said that purchase prices have reduced allowing them to snap up deals and new opportunities.
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“In the short term, while inflation is coming back under control, the higher interest rate environment will take some adjustment for commercial property businesses, landlords and developers – including de-risking portfolios and diversifying into new growth sectors,” said Rob Thomas, economist and principal researcher at the Intermediary Mortgage Lenders Association (IMLA).
“However, for those looking for growth in the medium to longer term there are opportunities across the sector this year onwards. And the insight on the ground is that the sector is in rude health.
“When looked at in the round, the scale of the opportunity is significant. To put it in perspective, total secured commercial lending is predicted to rise by 32 per cent from an estimated £90bn in 2023 to £118bn in 2028.”