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Commercial property rents predicted to slow with lease terms expanding

Latest research by various property consultants and experts indicate that rent levels are set to slow this year and lease terms on new deals will move out.

In the UK, the introduction of measures to restrict movement to try to slow the spread of coronavirus will cause significant disruption to activity in the short term and 2020 UK GDP forecasts have been slashed to -1.4% from +1% only a month ago. There is huge uncertainty around the duration and impact of current measures and a further worsening of the outbreak and financial stress could see GDP fall by 2.5% this year.

Research by Colliers International points to investors developers and landlords expecting that there will be little rental growth whilst lease term incentives will be moving out.

Gerald Eve notes: ‘Like all commercial property sectors, there is an expectation that industrial and logistics tenant defaults will increase through 2020 as cashflows are impacted, but this will also depend heavily on government intervention and the nature of industrial occupier activities.

“While all occupiers will experience short term impact, the scale and duration will vary greatly across industries.

“Many tenants are struggling with cost pressures and are already requesting monthly payment plans or rent payment holidays, and these are being looked at on a case-by-case basis to assess genuine need. Industrial and logistics occupiers have not benefitted from the recently announced relaxation of business rates liabilities and other tax credits, with the 12-month business rates suspension currently only for retail and leisure sectors.”

Property consultants and experts are lobbying for business rates cut across the board not just for retail and leisure.

However, once things return to ‘normal’ it is expected that rent levels and lease terms will bounce back.

Source: Logistics Manager

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Scottish commercial property market ‘shows resilience and growth’ in 2019

Scottish Property Federation (SPF) analysis of 2019 commercial property sales figures has revealed that the total value of sales grew in Scotland for the third consecutive year.

At £3.37 billion, the value of commercial property sales in 2019 hit its highest annual total since 2015. The total value of sales increased by £136m (4%) compared to the total for 2018.

The SPF’s analysis also shows that the number of commercial property transactions was the highest in the decade, standing at 4,667.

The number of commercial property transactions has increased every year since 2012, with 139 (3%) more sales taking place in 2019 than in the previous year.

Cities

Edinburgh continued to dominate the Scottish commercial property market. The capital recorded £1.01bn in commercial property sales during 2019, some £379m (60%) more than in 2018, and accounted for 30% of the Scottish commercial property market by value.

Glasgow also saw an increase in the total value of its commercial property sales. Scotland’s largest city saw total sales of £753m, some £229m (44%) higher than in 2018, and captured a 22% share of the Scottish commercial property market.

High Value Sales

Of the 4,667 commercial property transactions in Scotland during 2019, only 97 (2%) sold for over £5m. However, with a combined value of £1.75bn, these transactions accounted for more than half of the Scottish market by value. In total, 15 of Scotland’s 32 local authorities saw sales at this section of the market in 2019.

David Melhuish, director of the Scottish Property Federation, said: “We’re pleased to see the Scottish commercial property sales market continue to grow in what has been an uncertain time for the economy and businesses. We expect to see this resilience turn into stronger confidence in the commercial property markets during the course of 2020.

“Our analysis shows the strength of both Edinburgh and Glasgow, which between them accounted for more than half of the Scottish market in 2019 in value terms.

“Edinburgh has seen a particularly strong year with several high value transactions occurring in 2019, including the sale of Standard Life Aberdeen’s headquarters and M&G Real Estate’s acquisition of Exchange Plaza.

“Glasgow saw a number of high-value retail transactions by overseas investors, including assets at the Great Western Retail Park and the Sauchiehall Building in the city centre.”

Source: Scottish Construction Now

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End of Brexit uncertainty boosts London commercial property market

London is set for an increase in commercial property investment in 2020 as international investors target the capital’s high-yielding office market, following the decisive 2019 UK General Election result. According to the latest research from Knight Frank, investors have increased the total capital targeting London commercial assets to £48.4bn, a 21 percent rise on 2019 and £2bn higher than 2018. However, with just £2.3bn of buildings for sale, investors will face strong competition, which is expected to drive values higher in 2020.

Knight Frank’s annual London Report details the opportunities and challenges facing the capital’s real estate market in the year ahead. It reveals that in 2019 London commercial property investment activity fell 15 percent to £13.9bn, down from £16.8bn in 2018, as Brexit uncertainty and a shortage of available assets constrained the number of deals.

Nick Braybrook, Head of London Capital Markets said: “Despite the fall in activity, London remained the second largest market for commercial office real estate investment in 2019, topped only by Paris and ahead of New York, Hong Kong and Berlin. London’s stability and global status is attracting international investors who see a competitive economy, strong occupier market and high office yields, compared with other global cities. We expect the sheer weight of international demand for London assets to push prices on, and we have already seen an increase in transactions as activity ramps up following the UK General Election result.

“International investors are attracted to London as a safe haven, offering political stability and positive growth prospects, as well as an attractive exchange rate and high yields. Office yields are amongst the best in the world and certainly the most favourable when compared to key European centres. In the City of London average yields are currently 4 percent, while in London’s West End they stand at 3.5 percent. Comparable yields in leading European cities such as Paris, Frankfurt and Amsterdam are 3 percent. And despite the prospect of London yield compression this year, office yields still outweigh most global bond offerings.”

Faisal Durrani, Head of London Commercial Research said: “One of London’s underlying strengths is its vibrant labour market, which is reflected in resilient leasing activity. New office development has not been able to keep pace with this demand, and almost half of the space currently under construction is already spoken for. This supply crunch is most significant for those businesses seeking large amounts of space. We are tracking 30 businesses seeking more than 100,000 square feet, yet there are currently just 16 buildings in London that can service these requirements.

“Indeed, the supply shortage is helping to underpin our rental growth projections over the next five years. These show that headline office rents will rise by 15.7 percent in core West End locations such as Mayfair and St. James’s by the end of 2024. Elsewhere, we forecast rents in the City core to grow by 20 percent in the next five years.”

By Neil Franklin

Source: Workplace Insight

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British commercial property back on the investment map

Investors expect to plough billions of pounds into UK commercial real estate this year, citing some long-awaited Brexit clarity after last week’s departure from the European Union.

Real estate investment foundered after Britain’s vote to leave the EU 3-1/2 years ago, hit by uncertainty over the move and its potential impact on the economy. But sentiment has improved with December’s resounding election victory for the Conservative party, effectively guaranteeing Brexit.

Though a trade deal between Britain and the EU has yet to be negotiated, LaSalle Investment Management told Reuters it plans to spend 1 billion pounds (on UK property this year. The company already has 12.3 billion pounds in real estate assets in Britain.

Madison International Realty, meanwhile, is “pursuing several possible transactions”, accoring to the private equity firm’s president, Ronald Dickerman. The firm said in October that it had more than $1 billion to spend on central London.

Dutch real estate developer Breevast, London-listed Intermediate Capital (ICG) and U.S. duo CA Ventures and Invesco Real Estate all told Reuters they see opportunities in Britain, with ICG’s co-head of real estate, Martin Wheeler, highlighting increased appetite from overseas investors.

Apollo Global , which lent $2.9 billion for real estate in Britain last year, is similarly upbeat. Ben Eppley, head of European commercial real estate debt at Apollo, said there has been an “an unlocking of transactions” in recent weeks thanks to greater clarity over Brexit.

Ghada Sousou, CEO of real estate recruitment agency Sousou Partners, said the business had been introducing UK real estate companies to overseas investors.

It is also helping a private equity firm to build up a UK real estate team, she said without naming the firm.

Uncertainties have by no means disappeared, however, with the trade deal negotiations and broader global economic factors having the potential to weigh on UK property.

“We are starting to hear from some European capital that maybe it’s time to think about London,” said Zach Vaughan, head of European real estate at investor Brookfield, adding that it may be too early to talk about a rise in transactions.

“If you are sitting on an investment committee in another country, you will ask what happens if there is no trade deal? More uncertainty is never helpful.”

By Carolyn Cohn and Simon Jessop

Source: Yahoo Finance UK

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Scottish commercial property investment exceeds £2 billion in ‘uncertain’ 2019

Investment in Scottish commercial property remained resilient despite a dip in volumes amid political and macro-economic challenges, according to new analysis from Knight Frank.

The independent real estate consultancy found that £2.074 billion worth of deals concluded in 2019. This was 10.38% below the five-year average after a quiet final quarter, when the UK went to the polls for the General Election.

Edinburgh offices was the stand-out asset class in 2019, increasing by 70.42% on the year before – from £284 million to £484m. By June 2019, investment levels in Edinburgh offices had outperformed the whole of last year on the back of a series of major transactions, including the Leonardo Innovation Hub at Crewe Toll and 4-8 St Andrew Square.

Overseas investors continued to be the main drivers of investment in Scotland last year, with a 56% share of spend on commercial property. Meanwhile, UK institutions’ share of investment has dropped to just 14%.

The well-publicised challenges faced by the high street were reflected in property investment levels in 2019. Transactions for shop units were 79.57% below the five-year average at just £44m (compared to £215.4m), while shopping centres represented £38m of investment in 2019 against an average of £197.6m (-80.77%).

However, Knight Frank said that following the General Election there had been a raft of interest in the Scottish commercial property market and, with a number of buildings being lined up for a sale, the year ahead looked very positive.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “There were a lot of factors for investors to contend with in 2019 – Brexit negotiations, a change of Prime Minister, and a General Election to name but a few.

“That inevitably leads to a pause for thought, as we have seen with any significant macro-economic or political changes in the past. Against that backdrop, investment levels were robust last year and there were some significant bright spots, such as Edinburgh offices.

“The proportion of buyers from overseas is at historic highs, with more than half of investment coming from international sources and the majority of deals being concluded off-market. Korean funds were particularly active last year – concluding three major deals in Edinburgh and Glasgow – while Middle Eastern interest has also been strong.

“We are already seeing signs that 2020 could be a great year. Investors are coming back to the market now that there is some much-needed political stability. We have had interest come in from a range of international sources, including some buyers who would be new to the Scottish market.

“Inevitably there will be some bumps in the road ahead as Brexit begins to take shape; but, for now, there is a real window of opportunity emerging and we expect trading volumes to pick up in the first half of 2020, all things being equal.”

Source: Scottish Construction Now

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Investing in commercial property: a tale of three markets

Britain’s commercial property sector has traditionally been divided into three subsectors: industrial, offices and retail. In the 1980s and 1990s, retail outperformed while industrial properties struggled as consumer spending rose inexorably but the country deindustrialised. In the last ten years retail has lagged as household spending migrated online; industrial property, however, has outperformed thanks to the growth in logistics warehouses, notably to service online shoppers. But in recent years some of the best growth has come from three smaller subsectors: student housing, healthcare and self-storage – or beds, meds and sheds. Investors can gain access to each of these subsectors through real-estate investment trusts. Are they still worth a look?

The university boom

Student numbers reached 2.3 million in 2018; 75% are undergraduates and 80% are British. Despite the introduction of full tuition fees in 2012, more than half of school leavers go on to higher education. The annual number of applicants through the Universities and Colleges Admissions Service (UCAS) has doubled to 533,0000 in 25 years. Students used to live in college-owned halls of residence or in the private rental market. But demand outstripped both the willingness of the former to provide the necessary capital and the capacity of the latter.

Unite Group (LSE: UTG) was founded in 1991, initially to provide purpose-built student accommodation in the Bristol area. It now provides 75,000 beds across the country. Unite forms partnerships with universities to ensure high occupation: 92% of beds are reserved for 2019/2020 and 60% are guaranteed by universities. Occupancy of 98%-99% has consistently been achieved and rental growth is in the range of 3%-4% per annum. At mid-year the group’s assets stood at £3.2bn, of which £1bn was financed by borrowings, although the £1.4bn recent acquisition of Liberty Living will have increased gearing to around 35%.

The shares, at 1,240p, trade at a 47% premium to net asset value (NAV), are valued at over 30 times earnings and yield just 2.6% but Unite says that the acquisition is “materially accretive to earnings”, while it is “confident of 3%-3.5% medium-term rental growth”. But even if the 12% growth in interim earnings and 8% growth in the dividend continues, it will take several years for the shares to look good value, despite the low-risk business model.

A turnaround story

Empiric Student Property (LSE: ESP) with 8,882 beds and £1bn of assets, seems much better value at 98p. It is on a 10% discount to NAV and yields 5%, but it is recovering from operational problems in 2017 that prompted a dividend cut. It focuses on smaller, higher-quality and more expensive buildings to appeal to graduates (46% of tenants) and overseas students (67%). GCP Student Living (LSE: DIGS), with £960m of assets, is of a similar size, but has less debt and an unblemished record. It trades on a 14% premium to NAV and yields 3.2%. It has 4,116 beds in 11 locations, but just 23% of its tenants are from the UK. As with Empiric, this may be an advantage as growth in international student numbers looks assured.

The rise of the health centre

The merger of Primary Health Properties (LSE: PHP) with MedicX leaves just two companies specialising in health centres: PHP, with £2.3bn of assets and Assura (LSE: AGR), with £2bn. Both trade on large premiums to NAV (38% and 50% respectively). But the attraction is dividend yields of 3.7% and 3.5% that are not only very safe, but also all but guaranteed to be at least inflation-indexed.

Both groups own purpose-built health centres, at least 90% of whose income comes directly or indirectly from the NHS on long-term leases, with the rest coming from pharmacies. Following the acquisition of MedicX, PHP now owns 488 of these, which are 99.5% occupied, while Assura has 560.

These health centres have replaced many of the old, small GP surgeries, but house many more doctors together with modern equipment, clinics, diagnostic testing, pharmacies and even day-surgery centres. Rental agreements provide for modest annual increases, but there is the potential for more if a property is modified or extended. Expansion comes from buying recently built premises or through funding a developer and then buying on completion, thereby avoiding risks connected with construction.

With only 20% of the PHP portfolio having a lease expiry of less than ten years, there is little opportunity or wish to trade the assets; the value of the shares lies in the rental stream. This makes them comparable to infrastructure funds, except that ownership of the assets is permanent. Strong performance in 2019 means that the shares of both are no longer great value, but they represent sound investments for those seeking secure, growing income.

The “meds” theme also covers two smaller companies that own residential care homes, Impact Healthcare (LSE: IHR) and Target Healthcare (LSE: THRL). Target, with £600m of property assets and £100m of net debt, operates 69 purpose-built care homes. Impact, with £311m of property assets and some £10m of net cash, owns 84 care homes and two healthcare facilities leased to the NHS. In both cases, the care homes are leased to high-quality operators for the long term, with built-in rental increases. Both shares seem attractive, with Target trading on a 7% premium to NAV and yielding 5.8%, while Impact trades on a 2% premium and yields 5.7%.

Note, however, that the number of care beds in the UK has fallen some 20% since its peak of around 550,000 in 1997. The NHS and local authorities have not been prepared to increase payments to operators by enough to cover escalating costs. In 2011 Southern Cross got into trouble amid an 8% drop in occupancy, the result of fewer referrals due to public-spending cuts. It could not pay its escalating rent bill and became insolvent. Well-run care homes are the most cost-effective way of caring for the elderly, but governments have repeatedly pursued the false economy of squeezing the private operators, who account for nearly all capacity. If this keeps happening, Target and Impact could find their rental income under pressure from struggling operators.

Businesses need more storage space

The self-storage market conjures up images of warehouses crammed with personal possessions. That, however, probably only accounts for a small part of the UK’s 20 million square feet of lettable area, with rates varying from £16 per square foot (sq ft)in Scotland to £28 in London. Personal storage is an important part of the market, but the business market is key. For small businesses, storing goods, records and stock at a self-storage unit or lock-up garage is likely to prove much cheaper than doing so at an office or in a shop, particularly with the increasing number of online entrepreneurs operating from home.

Hence the success of the two listed specialists, Safestore (LSE: SAFE) and Big Yellow (LSE: BYG), trading at premiums of 52% and 75% to NAV and yielding 2.2% and 2.8% respectively. Safestore, with 149 stores (including 22 in the Paris region) has 6.5 million sq ft of lettable area valued at £1.4bn and Big Yellow, with 75 stores, has 4.6 million sq ft valued at £1.5bn.

Big Yellow’s recent interim results revealed revenue and profit growth of 3.4% and 6% respectively, thanks to a small increase in like-for-like occupancy and a 1.9% increase in rent per sq ft. Lettable area increased only 0.7%, although there are 13 development sites, of which six have planning permission. Big Yellow also owns 20% of Armadillo, with 25 stores, which it presumably hopes to buy the rest of. That would give it 6.6 million sq ft in all.

Safestore’s recent final results showed a 5.6% increase in revenue and a rise in earnings per share of 6.3%, thanks to increases of 3.5% in average occupancy and a 1% in average rates. It plans four new stores in 2019/2020, but insists that its “top priority remains the growth opportunity of the 1.5 million sq ft of currently unlet space”. Big Yellow’s occupancy of 83.4% is higher, despite its larger stores, giving less unlet potential and its net rent per sq ft of £27.73 is 6% higher than Safestore’s, despite the latter’s focus on London and the southeast (70 stores). Both shares trade on 27 to 28 times underlying earnings, so they look expensive despite the solid record and prospects.

ASR strategist Zahra Ward-Murphy acknowledges that “the beds, meds and sheds theme is not new and these sectors have been outperforming for some time. Nonetheless, we like these sectors because they are underpinned by secular demand drivers and therefore should prove relatively resilient to any further slowdown in growth”. Business risks look low and dividend yields are reasonable in relation to low interest rates and bond yields, while dividends should climb steadily.

However, with the exception of the recovery story of Empiric and the historically risky care-home owners, valuations are high and vulnerable to market setbacks, so investors should wait for the next general sell-off before eyeing them up.

By Max King

Source: Money Week

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Commercial estate agents keen for approval rates of planning permissions

The majority of commercial estate agents (74%) would like to access data where they can easily see the approval and refusal rate of commercial property planning permissions, research by SavoyStewart has found.

Some 69% think there needs to be improved data when trying to identify the average price per square foot that commercial properties have sold for in any given area.

Darren Best, managing director of SavoyStewart, said: “Data has revolutionised the property industry. Providing key analytics and metrics on various variables that are enabling property professionals to make more informed decisions.

“As the quantity and quality of data grows, there are various aspects with regards to data that commercial property professionals wish there was more of or could be more fine-tuned to provide greater insights.

“This research certainly highlights the type of data that property professionals hope is more easily available in 2020. With some very surprising outcomes.”

Similarly, 63% desire data that will allow them to determine the average asking price per square feet that commercial properties in any set location are commanding.

Interestingly, over half (51%) would like to gain more data that highlights the commercial property crime statistics for different postcodes.

Some 40% feel the same about data that will enable them to more accurately assess the average internet speeds by postcodes.

Alternatively, just under a third (32%) feel more data is required on 5-year capital growth projections for commercial property in any given postcode.

By Michael Lloyd

Source: Mortgage Introducer

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‘Outstanding’ final quarter for north’s commercial property market

A SPRINT finish final quarter saw commercial property investment volume in Northern Ireland complete at £215.1 million last year – 19 per cent above 2018 though 4 per cent below the ten-year average, according to new research from Lambert Smith Hampton.

Its Investment Transactions bulletin showed that despite an outstanding final quarter with volume of almost £91m, the uncertain local and national political climate continued to weigh on volume with 2019 annual volume the second lowest since 2013.

Retail retained its place as the dominant asset class in Northern Ireland, with £92.5m of transactions accounting for 43 per cent of volume in the year due to two large fourth quarter retail park transactions. Throughout the first three quarters of the year, the highest proportion of volume had been in the office sector with Belfast city centre office investments remaining the most in demand asset class.

Despite a challenging retail market, three retail parks transacted in the latter half of 2019. In the largest deal, Sprucefield retail park in Lisburn was bought by New River Retail for £40m (yield 8.71 per cent), Crescent Link retail park in Derry was purchased by David Samuel Properties for £30m (11.50 per cent yield) and Clandeboye retail park by Harry Corry Pension Fund for £8.7m (13.50 per cent yield).

Office transactions this year totalled £74.1m, the highest volume in the office sector on record, boosted by Citibank’s purchase of their Belfast headquarters, the Gateway Office in the Titanic Quarter, for £34m (5.48 per cent yield). Other notable office transactions included a local government department’s £16.0m purchase of James House at the Gasworks and Vanrath Recruitment’s £12.5m purchase of Victoria House.

2019 saw a number of office assets purchased by owner occupiers for a combined total of £62.8m, including the aforementioned Gateway Office, James House and Victoria House.

As usual, local investors were the most active investor type. By comparison to 2018, activity from this group was subdued with the number of transactions down 38 per cent and volume down 23 per cent. There were a number of higher value assets purchased by private investors including Antrim Business Park for £12.5m (14.5 per cent yield) and Timber Quay in Derry for £5.3m (11.5 per cent).

At £26.2m industrial volume was at its highest for the decade in 2019, with both propcos and private investors purchasing in this sector. In Armagh, 35 Moy Road was purchased by David Samuel Properties for £6.3m (7.28 per cent yield) and CD Group, Mallusk by Alterity Investments for £2.6m (7.23 per cent).

Martin McCloy, director of capital markets, Lambert Smith Hampton, said: “Q4 provided a strong finish to what was a difficult year for the investment market. The extension of the Brexit deadline, the lack of a Stormont executive and the prolonged uncertainty delayed investment decisions in 2019.

“Yet demand remained constant with potential investors in Northern Ireland particularly seeking secure long-term income or high quality office investments.

“While retail was again the dominant asset class by volume, this was as a result of a small number of large transactions rather than a signal of renewed attractiveness in what is still a challenging sector. Core assets remain attractive but pricing is key.”

He added: “It is anticipated that the ending of local political uncertainty and increased clarity on the Brexit process will boost investor confidence, translating into a substantial release of pent-up demand and a busier 2020.”

By Martin McCloy

Source: Irish News

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2020 will be ‘year of opportunity’ for north’s commercial property market

THE north’s commercial property market ended the year with a much needed boost with the sales of Sprucefield retail park in Lisburn by Intu and Crescent Link Retail in Derry by the Lotus Group.

The combined value of these deals, at £70 million, brought the total value of commercial property investments in Northern Ireland for 2019 to just over £210m.

Property investment at this level is a considerable improvement on levels seen in 2018 at £165m, though there is a long way to go to reach the five-year average at just over £300m a year.

The subdued level of investment in 2019 is not surprising given the uncertainty around Brexit over the last few years, and we would expect investment levels to bounce back strongly this year given the strong mandate the Conservative Party received in the recent general election and the relatively stable macro-economic outlook

The office sector again performed strongly in 2019 with take up of 517,000 sq ft, well ahead of the five year average. Significant deals throughout the year included the signing of leases by Deloitte for 80,000 sq ft in the Ewart Building on Bedford Street, PwC taking the remaining 46,000 sq ft in Merchant Square and the letting by Kilmona of the entirety of Chichester House on Chichester Street to Rapid 7.

The outlook for 2020 for the office sector also looks strong with stated requirements in the market in excess of 400,000 sq ft including the NI Civil Service Requirement for 161,500 sq ft and the as yet unsatisfied Citi requirement for 120,000 sq ft.

Available prime office stock is as usual fairly limited though buildings including The Sixth, Paper Exchange and The Mercantile all in prime locations could be brought on stream this year subject to suitable pre lets.

Trends in the office occupier market are set to continue with co working/serviced office providers predicted to continue their significant expansion throughout the UK.

Technology is as ever set to change the way we work though it is unlikely to affect the demand for office space in the short to medium term as office workers need to interact with each other in an easily accessible work enhancing environment.

The continuing challenges in the retail market will create opportunities both for successful retailers to relocate to better position and for investors who are prepared to look at the sector. There will be undoubtedly be a need for alternative uses for retail space in both suburban shopping centres and retail parks but also in our towns and cities given that the prime retail areas are becoming smaller.

In order for our bricks and mortar retailers to successfully continue to compete with the steady advance of the internet, our government will have to look at the level of rates charged to retailers and work out a way to balance the playing field with their internet competitors. though where this sits on the level of government priorities remains to be seen.

On balance, the outlook for 2020 is a positive one and we look forward to the challenges that the year ahead will bring.

By Declan Flynn

Source: Irish News

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Why You Should Use A Commercial Finance Broker – The Benefits Of Working With A Mortgage Broker

Working with a commercial finance broker has many benefits other than the ones that are obvious. Here’s why and how it can save you a great deal of time, money and hassle.

The commercial finance sector has long been a mystery to most businesses that have wanted to borrow money from time to time. The days of simply walking into your local bank and finalising a handshake deal with the manager are long gone. Banks – despite their best efforts – are hardly able anymore to cater to the huge capital demands that UK businesses have.

Naturally, private lenders have managed to fill this gap in supply. But that has also spelt trouble for the borrowers in terms of predatory lending and other ills. Moreover, many borrowing businesses don’t have at their disposal the necessary experience to understand all the aspects involved in a commercial loan. This is where commercial finance brokers come into play.

There are many reasons why you should use the services of an experienced, responsible and licenced broker.

Before We Start – What Is A Mortgage Broker (Or Finance Broker)?

Many people – especially those who haven’t borrowed before – have a flawed understanding what finance brokers really do.

In the simplest of words, a finance broker or a mortgage broker is a professional entity (an individual or a firm) licenced to offer expert finance advice and match your loan requirements with suitable offers from lenders.

Brokers operate in almost every lending sphere – from small-scale personal finance to large-scale commercial finance. Commercial finance brokers (like Commercial Finance Network) specialise in helping businesses find just the right kind of finance deal.

While the finer aspects of why you should use the services of a broker will be discussed below, it should suffice for now to say that an experienced broker can help your business through tricky situations of cash and/or credit crunch.

Why Approaching A Lender Directly May Not Always Work

Getting a business loan used to be a straightforward affair not too long ago. Just contact the local bank branch or high street lender, let them know of your requirements and accept one of their ready-made finance products – easy as you like.

The simplicity in this structure, however, came at your expense. Getting into a retail finance deal is almost always a bad idea for a business because it’s not only more expensive, it fails to bring to your notice all the possible options you can choose from.

In addition, approaching lenders directly is a tedious and time-consuming process, regardless of how straightforward it may seem to be. If a lender turns your application down, you have to repeat the whole process again, leading to multiple soft and hard credit checks that leave their footprints all over your credit report.

Here’s why using an experienced broker gives your loan application an edge.

1. Brokers Make Borrowing Easier, Faster And Safer

Approaching a lender directly for a commercial loan may not always be the best idea, as we just discussed. It can not only drain your resources quickly; it also almost always leads to you getting a rather unfair deal.

Commercial finance brokers help you avoid this scenario by making the entire borrowing process smoother, faster and safer. Commercial Finance Network, for example, is among the handful of brokers out there who have an impeccable track record of turning around loan applications within 24 hours.

Moreover, all licenced brokers are obligated to treat your personal details with utmost care. When you use a broker’s services, you’re still in charge of your application, at all times. 

2. You Get To Choose From Offers You Would Otherwise Have Never Seen

This is probably the most important benefit of using commercial finance broker services.

When you approach a lender directly, they can only produce quotes that are drawn from the products they already offer. There is no room for customisation, and you will often have to make do with incompatible loan products just to save the day.

For example, if you’re applying for asset finance and the lender only offers lump-sum business loans, you will be left with an offer that makes no sense in terms of your requirements.

Working with a broker eliminates this problem altogether. Many lenders work exclusively with brokers and offer broker-only finance products that wouldn’t be accessible to you if you were to approach them on your own.

You can go a step ahead and work with a whole of market commercial finance broker like Commercial Finance Network to make sure that you receive offers from UK-wide lenders.

3. Brokers Can Save You Money

If you’re worried about broker fees and charges, you shouldn’t be.

Brokers who work with specialist lenders are often able to produce quotes that are much cheaper than their retail counterparts. Eventually, the money you save in the form of lower interest rates and faster disbursals outweighs any broker fees you would be required to pay.

An FCA-regulated and responsible broker like Commercial Finance Network will never charge you hidden fees. You will know exactly how much you’ll be paying before you get into a deal.

4. You Can Access Specialist Lenders

Specialist lenders are typically small to medium sized lenders who only offer highly specialised finance products like invoice finance, development finance and HMO loans.

Since it saves them a great deal of hassle, many such specialist lenders prefer to work exclusively with brokers. In essence, using a broker’s services helps you unlock offers from specialist lenders.

Working with specialist lenders also means that the lender can offer invaluable business insights and advice, making every loan offer that much more rewarding.

5. You Cannot Buy Experience

A reputed broker brings with them years’ worth of experience that you cannot really put a monetary value on.

Such brokers know how to navigate through tricky finance situations that you wouldn’t otherwise be able to handle on your own.

Whether you want to fast-track your BTL loan, get a business loan despite poor credit history, seek guidance regarding a particularly unique valuation and planning permission problem or customise your repayment plan based on your income, an experienced broker like Commercial Finance Network can certainly help you.

6. Brokers Understand Your Affordability Better

Unfortunately, over the years, both borrowers and lenders have time and again managed to downplay the importance of understanding creditworthiness and affordability. This has, quite predictably, paved the way for unreasonably structured, unfairly priced loans that – at times – border on being predatory.

Using a commercial finance broker means you conveniently stay away from this debt trap. Brokers know how to best judge your affordability based on your income, your assets and your spending, allowing them to only produce offers that are in your best interests.

7. Brokers Can Offer Precious Financial Advice

There’s a world of difference between personal finance and commercial finance – a fact many borrowing businesses fail to take into account while applying for a loan.

Poor judgement and uninformed decisions lead to mistakes that the borrower has to live with for years, if not decades. You can get around this problem by soliciting financial advice from a responsible broker like Commercial Finance Network.

Summing Up – Here’s Why You Should Use A Commercial Finance Broker

  • Save time and energy
  • Choose from market-wide offers
  • Save money
  • Benefit from the broker’s experience and expertise
  • Stay away from unaffordable loans
  • Avail expert advice from FCA regulated professionals

Choosing A Commercial Finance Broker – Things To Keep In Mind

Now that we’ve talked at length about what a commercial finance broker brings to the table for you, it’s time to see what you should look for while choosing one.

There are no yardsticks or guidelines set in stone here, but the following points will certainly help you make an informed and educated choice.

1. Are They Licenced And Regulated By The FCA?

This is perhaps the most important question you should ask.

The Financial Conduct Authority is the sole and stringent regulator of all commercial finance activities in the UK. As a rule of thumb, you should refrain from working with brokers who don’t have the FCA licence.

How To Check If Your Broker Is FCA Regulated

Checking whether your broker is FCA-regulated or not is easy. For starters, regulated brokers will have the FCA reference number and other associated information prominently displayed on their website. If they haven’t, you can always contact them regarding the status of their licence.

You can cross-check this information by visiting the FCA register.

For example, Commercial Finance Network is FCA regulated with reference number 796413.

2. Are They Associated With Any Trade Organisations Of Repute?

This isn’t really a non-negotiable, but it still gives you a good idea of the standing the broker enjoys in the industry.

Look for any certifications and memberships that lend credibility to the broker’s operations.

For example, Commercial Finance Network is a proud member of the National Association of Commercial Finance Brokers (NACFB), the largest trade association of UK-wide brokers.

3. Do They Handle Your Data Responsibly?

All businesses are required to handle your personal information and other data they collect responsibly. This applies even more so for brokers who need to collect your important personal and financial details.

When you visit your broker’s website, look for the data protection policy and/or privacy policy page. It is usually located in the footer section of the website.

A responsible broker is typically GDPR compliant and registered with the Information Commissioner’s Office (ICO).

For example, the Commercial Finance Network website is fully GDPR compliant and registered with the ICO.

4. Do They Specialise In Commercial Finance?

Many brokers out there try very hard to merge personal finance products with their commercial counterparts. This isn’t usually a good idea since commercial finance is much more robust in terms of product flexibility and variety.

If your broker offers exclusively commercial finance products like asset finance, business loans, HMO finance among others, it’s a good starting point.

5. Can They Compare The Market?

Whole of market brokers can compare the market and find lenders who are willing to base their quotes on your requirements. In the long run, this has an immense positive impact on your borrowings.

6. How Does It All Work?

Ask your broker the following questions to understand how their services work:

  • Will you need to visit their office?
  • What paperwork does the process involve?
  • Can you submit the necessary documents online?
  • What about the turnaround time on your application?

7. What Are The Broker Charges And Fees?

It’s imperative that you know all about the charges and fees you’ll be required to pay. Many brokers offer no-obligation quotes, while some may require you to pay a processing/admin fee even when you decide not to accept the loan offer.

It’s also important to know and understand when the charges will kick in – before you apply, after you apply or after you accept an offer.

Working With A Responsible Broker Means Working On Your Own Terms

Getting into a finance deal that isn’t cut out for your business’ requirements is never worth it. You will not only be required to repay more than you really should, you will also miss out on a number of features that specialist lenders can offer you.

Commercial Finance Network – a leading whole of market broker in the UK – makes your life easier by finding just the right kind of loan offers for you. Our commercial finance services span the entire range – from all-purpose commercial finance and mortgages to customised asset finance and invoice finance solutions.

24-hour processing, high approval rates, cheap interest rates and flexible repayment – we’ve got everything your business needs and more. Complete this short online form to get started or call us on 03303 122 646 to speak with a Specialist Mortgage Advisor now!