The Government have recently announced that in order for banks to qualify for their bonuses in 2011, there will need to be a rise in commercial lending for the year. This new measure was introduced in order to see more funding being ploughed into small businesses to aid economic recovery.
The crash that began in 2008 saw a huge drop in property values, but some new statistics show signs that commercial property values are on the rise. But it seemed clear in the last quarter of 2010 that the market was not going to recover very quickly, as banks were still holding back on commercial mortgages leaving many small businesses unable to buy business premises.
Commercial property sales in the first quarter of 2011 are also set to be extremely strong, RICS reports. 18 per cent of surveyors believe that demand would be strong over the next few weeks with many claiming that the commercial property market is set for its best quarter in four years. Activity is set to increase and sales look to be strong.
The statistic released also showed that almost 5% of surveyors had seen an increase in supply of commercial property so far this year. The news came after one of the country’s largest estate agents confirmed just after the new year, that there were limited commercial properties available in London which caused commercial property prices to stay high.
Whilst London commercial property prices may be increasing, the same may not be true of all UK areas. “Regional variations are becoming increasingly visible with the picture on rents and capital values broadly reflecting the emerging economic recovery” said the property group, who reported that demand from tenants and buyers in London was stronger than elsewhere.
Despite increasing demand for commercial property, securing a business loan or commercial mortgage to buy premises remains a problem for many small businesses. A recent report from the property company CB Richard Ellis has found that the number of commercial mortgage lenders in the UK has fallen by a third since the pre ‘credit crunch’ days of 2007.
Natale Giostra, head of European debt advisory at CBRE Real Estate Finance, said: “There are lots of lenders with appetite to lend, but they are being very selective and there will be a lot of cherry-picking in the loans they are willing to make. There is no one bank that is willing to offer every type of loan now.” The CBRE report found that only 69 of the 107 UK lenders with commercial real estate loans on their books are still actively lending. That means 38 firms have pulled out of the commercial mortgage market completely since 2007.
To try and increase the amount of commercial mortgages to small businesses, the Government recently announced higher business lending targets for UK banks. Bank bonuses for chief executives will partly be determined by their success in achieving these higher commercial mortgage targets, but many experts are sceptical that banks will loosen their purse strings in 2011.
For the foreseeable future, it would appear that growth will be slow, and it may take some time before lenders see the commercial market as less of a risk.
Howard writes for Just Commercial Mortgages the UK’s No1 site for the latest commercial mortgage rates and commercial property finance news.
