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RICS: Surveyors sense a downturn of commercial property market

The Brexit impasse is contributing to perceptions that the commercial property market is in the downturn phase of the property cycle, the RICS UK Commercial Property Market Survey has revealed.

Figures for Q3 2019 showed that 62% of surveyors sensed the overall market is in a downturn phase of the property cycle.

Brexit was suggested as having an increasingly detrimental impact on market activity.

Tarrant Parsons, economist at RICS, said: “Although a clear majority of respondents now perceive the market to be in a downturn, the fact that capital value expectations are still positive in many parts of the country suggests a relatively soft landing for the commercial real estate sector is anticipated overall.

“It remains to be seen what impact the latest Brexit developments have on confidence across the sector, but with the picture unlikely to become clear until into the New Year it may well mean hesitation continues over the near term.”

Tenant demand reportedly fell at the headline level with the net balance slipping to -19%.

Interest in the commercial property market fell at a faster pace last quarter with -15% more surveyors seeing a fall in investment enquiries.

By Michael Lloyd

Source: Mortgage Introducer

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Demand for commercial property at lowest level since 2012, says industry report

Demand for office space in the South West has slipped to its lowest reading since September 2012, the Royal Institute of Chartered Surveyors’ UK Commercial Market Survey has revealed.

The survey added that the current impasse over Brexit is contributing to perceptions that the South West commercial property market is in the downturn phase of the property cycle.

The RICS report for Q3 2019 said that enquiries from investors are down at headline level and that 53 per cent of respondents believe that the market to be on a downward trajectory.

Occupier demand in the South West fell at the headline level once again, with the net balance slipping to -19 per cent, the lowest reading since June 2012.

Once again, the retail sector continues to drive the overall decline (net balance -62 per cent, compared to -54% in Q2).

However, demand for South West office space also fell during Q3, with a net balance of -8 per cent compared to -1 per cent in Q2.

Demand for industrial space has a net balance in the region of +12 per cent.

The region’s retail sector continues to have large numbers of vacancies coming to market, prompting another increase in incentive packages on offer to prospective tenants.

Inducements are also on offer in the office sector with 17 per cent of respondents reporting a rise in the packages.

South West respondents to the survey project that rents for the coming three months are expected to rise in the industrial sector, the only sector to see any notable interest from tenants.

Unsurprisingly, the retail sector isn’t expected to improve, some 63 per cent of respondents in the region expect to see further reductions in rents across the market.

Across the UK, retail rents are reading at the lowest level since the financial crisis (Q1 2009).

Looking further ahead, local respondents expect prime and secondary retail rents to fall for the year ahead.

The outlook has turned negative for secondary office rents in the South West, driven by weakening expectations in London.

By way of contrast, the industrial sector continues to return rental growth projections for the coming 12 months in the region.

Interest in investing in the local commercial property market fell again this quarter, with -5 per cent more South West respondents seeing a fall in investment enquiries.

Overseas investment demand also declined across the sectors with a net balance of -9 per cent of respondents seeing a fall.

Tarrant Parsons, RICS Economist, said: “Although a clear majority of respondents now perceive the market to be in a downturn, the fact that capital value expectations are still positive in many parts of the country suggests a relatively soft landing for the commercial real estate sector is anticipated overall.

“That said, the fallout for retail is altogether more severe. It remains to be seen what impact the latest Brexit developments have on confidence across the sector, but with the picture unlikely to become clear until into the New Year it may well mean hesitation continues over the near term.”

Martin Smalley of Gleeds in Bristol added: “Brexit unsurprisingly has created an atmosphere of uncertainty in the regions.

“There are however hotspots around areas of significant infrastructure investment like Hinckley Point C which is fuelling growth across the commercial, retail, industrial and residential sectors.”

By James Young

Source: Punchline Gloucester

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Brexit impasse ‘impacting Scottish commercial property market’

THE Brexit impasse is contributing to perceptions that the commercial property market in Scotland is in the midst of a downturn.

The latest Royal Institution of Chartered Surveyors commercial property market survey has found anecdotal evidence suggesting that the process to leave the European Union is having an increasingly detrimental impact on market activity, with inquiries from potential investors in the third quarter lower than during the previous three months.

The latest results show that half of respondents in Scotland sense the overall market is in the downturn phase.

The highest proportion of respondents in Scotland since 2016 in the investment market said that inquiries from potential investors were lower than in the previous quarter.

The net balance for overall investment inquiries in Scotland during the period was -34%, meaning that 34% more respondents said that investment inquiries fell than said they rose.

The retail sector continues to drive the overall decline, with the weakest reading since 2008, showing a net balance of -70%, which is the weakest across the UK.

Demand for office and industrial space in Scotland was reported to be broadly flat.

Interest in investing in retail was the weakest according to respondents, but investment inquiries were also reported to have fallen in the industrial, where there wasa net balance of -14%, and office, where it was a net balance of -20%, sectors.

In the occupier market, tenant demand reportedly fell at the headline level in Scotland for the fourth consecutive quarter, with the net balance slipping to -22%, from -3% previously, RICS said.

Scottish surveyors are cautious looking ahead about rents in over the next quarter. The overall net balance for three-month rental expectations is its weakest since the second quarter in 2016 at -23%.

However, this is driven by pessimism regarding retail rents, with a net balance of -65%. Expectations for office and industrial rents are broadly flat.

RICS said Scottish respondents are more positive about the value of industrial and office property, with the balance of respondents pointing to modest growth in capital values in both sectors in the near term.

Richard Smith, of Allied Surveyors in Inverness, said: “The market over the last three months has been affected by political uncertainty. Clients tell us that they will invest when the uncertainty is removed, regardless of how that is achieved.”

David Castles, of Ian Philp Glasgow, said: “Office and industrial sector capital values will improve but supply of prime office developments is restricted, and more investment is required which hopefully will improve once market uncertainty is reduced.”

Tarrant Parsons, RICS economist, said: “Although half of respondents in Scotland now perceive the market to be in a downturn, the fact that capital value expectations are still positive suggests a relatively soft landing for the commercial real estate sector is anticipated overall.”

Meanwhile, research from Grant Property has shown investors from South East Asia are cashing in on the opportunities provided by a drop in the value of the British pound and increasing yields and rents in the UK buy-to-let market, especially with student flats.

The firm reported a surge of interest from Hong Kong and Singapore as new and existing investors are purchasing more buy-to-let properties to add to their portfolios. An increase in rents as high as 15% over the last 12 months alone, combined with steady long-term capital growth on average 7% per annum, are factors which are making UK property an appealing investment prospect, it said.

Peter Grant, founder of Grant Property, said: “In the last year we have sold over £38 million worth of properties to overseas investors and we are currently dealing with 25% more enquiries than this time last year.

“Investors see the uncertainty of Brexit as an advantage and are capitalising on the opportunity to snap up traditional flats in UK cities, particularly where there is a student population.”

By Brian Donnelly

Source: Herald Scotland

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An alternative future for commercial property

DIVERSIFICATION throughout commercial property portfolios, by private and institutional investors, is a long-standing tactic but has tended to centre around a select number of core commercial real estate classes.

That has changed in the post 2008 environment, as the industry has seen a growing appetite from investors in ‘alternative commercial property assets’ and the rise in levels of investment in these asset classes across the UK and Ireland is starting to be felt north of the border here in NI.

Figures announced for the UK mainland at the start of this year show that in the first quarter of 2019 investment in these alternative real estate assets, such as hotels, private residential, student accommodation and care homes, reached a record 42 per cent share of the overall UK investment market for the quarter. Analysts report that this has been the highest share on record following 29 per cent and 35 per cent growth in this sector in quarters three and four 2018.

The proportion of Northern Irish investment transactions that fall into the alternative category doesn’t presently come close to this level, but there is no doubt that alternative property assets are increasingly piquing the interest of those investing in the province.

The proliferation of hotel investments in Belfast city centre across the past 24 months is well documented, in parallel with heightened investor interest in student accommodation as the Ulster University campus takes shape on Royal Avenue.

Unfortunately, the unexpected delay of construction at the university campus served to cool the later for a time, but several significant student accommodation schemes are now nearing completion with others coming online as the construction of this vibrant new part of Belfast city centre proceeds.

Other ‘alternatives’ including build-to-rent schemes that facilitate city centre living as well as alternative uses of traditional retail spaces that incorporate leisure facilities, entertainment and community alongside healthcare provision are becoming increasingly attractive to investors in the province as the The Belfast Agenda strives to make Northern Ireland’s capital home to an additional 66,000 people by 2035.

Residential letting schemes in Belfast with concierge services, gyms and residents’ lounges may be a novelty today but based on the wider UK and Irish markets the time when these represent a solid investment, even for the risk-averse institutional investor, might not be too far away.

Markets are changing, as are attitudes, incomes and the priorities of the people in general. Almost 25 per cent of UK households are expected to be living in rented accommodation by 2030, so it is unsurprising as models like build-to-rent start to become more common other ‘alternative’ investment options will follow suit.

By Declan Flynn

Source: Irish News

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Commercial property sales fall for second quarter but Glasgow bucks trend

Commercial property sales values in Glasgow surpassed those of Scotland’s capital for the first time since 2015, new research has found.

Analysis of Q2 2019 data by the Scottish Property Federation (SPF) showed that the total value of commercial property sales in Scotland continued to fall.

At £614 million, sales were the lowest in five years. While sales values fell, the number of transactions increased, indicating a decrease in higher value transactions rather than a lack of activity.

However, Glasgow broke from the national trend with the total value of commercial property sales rising against both the previous quarter and the same quarter in 2018. Sales in Glasgow totalled £172m for Q2, accounting for 28% of Scotland’s total commercial property sales.

Edinburgh lost its dominance to Glasgow in Q2 2019, following a significant fall in the total value of commercial property sales. At £108m, Edinburgh’s sales values decreased by £156m on the previous quarter and £14m on Q2 2018. The proportion of Scottish commercial property sales located in Edinburgh fell from 35% in the previous quarter to just 18% for Q2 2019.

SPF director David Melhuish said: “Glasgow was very impressive this quarter, outperforming Edinburgh for the first time in four years against a wider Scottish market that saw a reduced value of sales activity.

“Glasgow’s sales increase was fuelled by a number of £5m-plus deals, totalling £129m, whereas Edinburgh only secured £33m in the same category.

“A notable feature of Scottish commercial property investment in the Q2 period was the rise of capital sourced from Asia, which topped £250m for the first time on record, according to CoStar data.

“Ryden reported a standout £48m transaction for a Korean client of Knight Frank Investment Management.”

Source: Scottish Construction Now

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Glasgow beats Edinburgh for property deals

INVESTMENT from Asia helped the value of commercial property deals in Glasgow exceed Edinburgh for the first time since 2015.

However, the overall value of deals continued to fall in the second quarter, according to the Scottish Property Federation (SPF).

Deals worth a total of £172 million were concluded in Glasgow in the second quarter, up from £104m for the same period last year, compared with £108m in Edinburgh, down £14m.

It was the first time the value of deals in the west exceeded the capital total since the first quarter of 2015, with the market in Glasgow boosted by the £48.4m purchase of 110 St Vincent Street by South Korean investors. The building is occupied by Bank of Scotland.

While deal values rose in Glasgow, the overall value of sales in Scotland slipped to its lowest in five years, at £641m.

SPF director David Melhuish said: “Glasgow was very impressive this quarter, outperforming Edinburgh for the first time in four years against a wider Scottish market that saw a reduced value of sales activity.

“Glasgow’s sales increase was fuelled by a number of £5m-plus deals, totalling £129m, whereas Edinburgh only secured £33m in the same category.

“A notable feature of Scottish commercial property investment in the Q2 period was the rise of capital sourced from Asia, which topped £250m for the first time on record, according to CoStar data.”

By Scott Wright

Source: Herald Scotland

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Commercial property investment surpasses £100m in 2019

COMMERCIAL property investment in the north has surpassed £100 million this year, according to a new industry report.

The latest data from Lisney reveals a better than expected last quarter, with the recorded £60m investment between April and June 9 per cent up on the same period in 2018.

The resilient performance brings the total value of transactions in the market for the first half of 2019 to £101m.

The largest deal completed in the second quarter was Citi’s purchase of its Belfast office in the Titanic Quarter for £34m, with other notable transactions, including the sale of Antrim Business Park of £12.5m and the £5.25m acquisition of Timber Quay in Derry.

A total of £45m worth of commercial property was on the market in the last quarter, including the Great Northern Tower and Boat in Belfast, along with Clandeboye Retail Park in Bangor.

PwC’s decision to acquire additional space and occupy the entirety of its new 155,000 sq ft Merchant Square Belfast headquarters pushed take-up within the sector to 75,171 sq ft in the three months to June. That being said the total is down on the previous year, while a shortage of Grade A office space within Belfast city centre continues to be a challenge for the market until new stock comes online later this year.

The struggling retail sector was boosted by Primark’s opening of a second city centre store at Fountain House on Donegall Place and the expansion of its Abbey Centre outlet. In relation to the industrial sector, the biggest letting of the year was a 113,550 sq ft site on the Lisdoart Road in Ballygawley.

Declan Flynn, managing director of Lisney Northern Ireland, said the local market continues to perform admirably in spite of the uncertain political climate

“We’re continuing to see healthy levels of local activity at a smaller lot sizes with pricing remaining resilient. That said the appetite of external investors is undoubtedly hampered in the current climate,” he said.

“This is understandable as the capital markets reflect the risk associated with Brexit. The retail sector continues to be a major talking point as the sector remains in the midst of a correction, given how our volumes have been traditionally dominated by retail this is a particularly pertinent for the Northern Ireland commercial property market.”

By Gareth McKeown

Source: Irish News

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5 Commercial Finance Myths You Need To Be Wary Of

Is your take on commercial finance based on a myth? Read on to find out!

The UK financial market is among the largest in the world. It’s been growing every year, giving millions of people an opportunity to build enough wealth to fund their dreams. With big money, however, come big myths.

At Commercial Finance Network, we regularly come across borrowers who are genuinely worried and apprehensive, all thanks to these distorted truth and outright lies. So, we’ve decided to run a series of blogs that will, we hope, help dispel these myths.

This is the first entry in that series. You may want to visit and bookmark our blog for when you want to return. You can also sign up for our incredibly useful newsletter that will keep you posted about the latest news, updates and articles from the world of commercial finance.

Myth #1. Private/Alternative Lenders Are Always “Predatory”.

This is probably the most common myth of them all. Most entrepreneurs and young businesses have little to no experience of making commercial finance work in their favour, and, as a result, they end up relying heavily – almost too heavily for their own good – on whatever finance options they come across first. These, as you can guess, usually happen to be big banks and high-street lenders.

So, if and when banks fail to give them the deal they want, they either shelve their projects, or turn to alternative lenders as the last resort, but not without a great deal of apprehension.

This is something that will take years to change but change it must!

If you can keep your options open, you can always find alternative lenders who are willing to offer you quotes that are far cheaper, more flexible and faster than the ones you’d receive otherwise. While it’s true that there are many lenders out there who run predatory practices, it’s important to know that when you work with reputed brokers like Commercial Finance Network, you shield yourself from such threats.

Myth #2. I’ll Just Exhaust My Personal Credit Cards First. That’ll Be Cheaper.

 When you’re looking to finance business expenses – they can range from buying a property to funding refurbishments or exiting an active project – it’s very tempting to use the most accessible options first up.

Consequently, many business owners, even before they approach us, have already used up all their personal credit. This includes exhausting credit cards (often, including their partner’s) and stretching personal savings thin. This approach may even work in certain cases, especially when you are confident of establishing a firm source of revenue/investment soon.

But when you aren’t, it may just be better (and often cheaper) to turn to commercial finance for business needs.

Personal loans, more often than not, are small, short-termed and unsecured loans. They can take care of unexpected, emergency expenses, but that’s about it. They have, time and again, proven to be incompatible with business needs, despite an apparent rise in their popularity.

So, in summary, don’t stay under the impression that a personal loan can be a good alternative to commercial finance.

Myth #3. Commercial Finance Is Not For Those Who Have Bad Credit.  

A misconception, more than a myth. This false notion cuts across all commercial finance products, holding back many businesses that shouldn’t even be worrying about bad credit to start with.

It’s true that lenders do and will check your credit file. It’s also true that much will depend on your credit history. What’s not true, however, is that not everything depends on your credit file.

Many lenders specialise in working with individuals and businesses with bad credit. Such products may be a touch more expensive and may require additional security, but they can certainly help in the hour of need.

At Commercial Finance Network, we have a panel of specialist lenders who offer adverse credit mortgages to applicants across the UK.

Myth #4: We Can’t Afford To Wait This Long.

Everybody wants things to move fast, and that’s a perfectly reasonable expectation.

It’s undeniable that commercial finance used to move at a snail’s pace a few years ago. Thankfully, things have changed for the better (we, at Commercial Finance Network, have been at the forefront of this change).

When you work with an experienced broker, you can make things move really fast. For example, every commercial finance product that we broker is designed to take shape at an industry-leading speed. In essence, now is the right time to do away with the misconception that commercial finance is slow and sluggish.

Myth #5: It All Seems So Complicated!

It probably does, and we don’t blame you for it, at all.

Brokers and lenders have a track record of complicating commercial finance products to such an extent that they appear puzzling – especially to first-time borrowers. There are far too many numbers to process, making the whole process a winding dread.

But we’ve got good news. There are experts out there willing to understand your requirements and make these products work for you. Thankfully, we’ve got the best among these experts on our board – and they’re here to help you. When you apply for commercial finance using our portal, we make sure that you are always in charge, and every little detail is explained to you. There’s no room for confusion and there’s no scope for ambiguity. You get what you see.

In Conclusion: Explore Your Commercial Finance Options Bravely, They’re Always Worth It.

Commercial finance is indispensable. Once your business grows past a certain stage, using your personal savings just doesn’t cut it. You’ll need more robust, customised and cheaper financing options that will also be scalable.

Don’t be bogged down by the intricacies of commercial finance. Explore your options freely and make the most of your creditworthiness to fuel the growth of your business. To know more about how our commercial finance services can help you, please contact us here. You can also call us on 03303 112 646 to request a prompt call back.

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Commercial property: Lack of supply demands developments

There is no shortage of investors and developers looking to gain exposure to the Edinburgh office market.

However, as many landlords opt to hold on to their investments – attracted by rental growth and yield compression, there is a growing appetite to refurbish or redevelop older buildings in the Capital to meet the demand for quality office accommodation.

Edinburgh is experiencing historically high levels of occupier demand from a wide variety of sectors, with employers attracted by the city’s talent pool and the quality of life in the Capital.

However, the office market faces dwindling supply and we anticipate seeing a spike in rents as tenants compete for limited space.

Rents for grade-A offices in the city centre are currently around £35 per sq ft and could top £40 next year.

At present, there is little more than 250,000sq ft of prime office space available in Edinburgh and the two speculative developments currently in the pipeline – 
62 Morrison Street and 
20 West Register Street – are mostly or completely pre-let.

The Capital has lost more than 1.2m sq ft of office space to alternative uses in recent years, while take-up is running at 1m sq ft a year.

This poses two big questions: where will the money go? And where can thriving businesses house their growing numbers of staff?

Professional and legal services, the burgeoning tech sector, and a financial industry that continues to thrive – the market has rarely looked so good from an investor’s perspective.

Companies don’t want to relocate, even partially, because the city and lifestyle are key attractions for the talent that is the lifeblood of these service sector businesses.

But there are few – if any – sites in the city for large-scale speculative development still available.

Where possible, landlords are either substantially refurbishing older buildings or selling up, thereby avoiding construction and letting risks.

Competition for refurbished space is likely to hot up as the shortage becomes more acute; we are starting to see businesses actively competing for the best office locations.

Beyond that, the obvious escape valve for city centre-based companies lies to the west, around South Gyle and Edinburgh Park.

With excellent connectivity to the city and available space, we anticipate increasing demand and more interesting developments.

However, the city centre remains the most prized location for wealthy and ambitious, people-focused companies, and – where possible – older buildings will make way for more contemporary offices.

The re-development of Haymarket has been a start, but with investors poised and firms demanding more space, the next few years should see more interesting developments appearing.

Demand for office space around Edinburgh is likely to keep outstripping supply. As a result, rents look set to keep moving higher, especially as the city’s tech start-ups mature into larger companies, with a need to attract talented people.

By ELLIOT CASSELS

Source: Scotsman

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Investor enthusiasm for UK commercial property slumps

Investor enthusiasm for commercial property in the UK has slumped further as sentiment swings towards France and Germany.

Only 27 per cent of international professional real estate investors said the UK is their preferred market, down four per cent in the last 12 months as Brexit uncertainty continues to weigh on investor sentiment.

Meanwhile support for the French market saw a 20 per cent year-on-year increase and appetite for German investments rose by seven per cent, according to the latest commercial property investment barometer by real estate platform Brickvest.

There was also a drop in the volume of assets under management that investors are planning to plough into real estate over the next year according to the quarterly survey of 6000 international professional investors.

Investors are planning to commit 2.5 per cent of their total AUM, a drop of 33 per cent on the planned amount of 3.7 per cent in the second quarter of last year.

Brickvest chief executive Emmanuel Lumineau said: “The latest figures of our Barometer reveal the continued negative effect of Brexit uncertainty on the UK commercial property market among international investors and particularly those based in France and Germany.

“We can expect this to continue over the third quarter and the October deadline at the very least.

“In the meantime, France and Germany are becoming more attractive destinations for international real estate capital.”

By Jess Clark

Source: City AM