Things are looking up, according to the latest Lloyds Bank Corporate Markets Commercial Property Monitor, which analyses commercial property confidence.
Roughly a third of businesses interviewed expected to see an upsurge in market activity in the next six to twelve months, a percentage increase above the previous two quarters, with the London market comfortably seen as the strongest. This has had a positive knock-on effect for other regions, particularly in the North West, as funders seek additional commercial property value, say Lloyds.
Within London, around a third of businesses say they are holding higher cash reserves. A similar number are looking to purchase property and a corresponding group intends to inject equity to aid refinancing. In the UK capital, 42% of businesses expect an improvement in portfolio performance over the next 3–6 months.
In terms of UK accolades, those surveyed have tipped house building and out-of-town retail to be crying and thanking their families, for being the best performing sectors over the same period. Distribution and warehousing are predicted to go straight to the commercial property DVD bargain bin as worst performers.
A ‘bubble of activity’ has been found to centre around London’s prime market, due to sustained seller and buyer demand. A ‘real shortage’ of London prime assets is highlighted by Lloyds, driving yields down and prices up, and making businesses assess stock and examine their sale options to maximise the potential return on their investments. The report notes that foreign investment continues to make an impression on the commercial property market, thus heightening competition.
The findings are summarised as showing ‘less negativity about prospects for the next three to six months’. The majority of the 419 respondents expect interest rates to rise, to 1–2%, by this point next year. Economic concerns are seen as key, with ongoing uncertainty anticipated for the ‘foreseeable future’.
