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Commercial property market growth prediction

The commercial property market could see returns grow by 6.4 per cent in 2021, real estate firm Colliers predicts.

The growth would be made up of 4.8% income return and 1.6% capital growth.

This follows a 2.3% decline in all property total returns in 2020. The firm says industrial and supermarket assets will be the most popular with investors in its latest Real Estate Investment Forecasts report.

Oliver Kolodseike, deputy chief economist at Colliers, said: “Latest business and consumer confidence survey data suggest that the economy will bounce back strongly in Q2. This is heightened by consumer confidence rising to its highest level since before the start of the pandemic, adding to hopes that the consumer sector will help drive the economic recovery.

“Mild rental growth will result in a slight reduction in yields in the short term, but we expect yields to then generally shift out in line with the trends for the Bank of England Bank Rate and 10-year government bond yields.”

Colliers predicts that over the five-year forecast, industrial and supermarkets will be the best performing sectors.

All retail total returns are expected to show marginal growth of 0.6% this year, having suffered a 12.4% decline in 2020.

The office sector has also been going through structural change with lease lengths shortening according to Colliers.

While the proportion of deals signed with lease commitments in excess of three years averaged out at 77% between 2016-2019, in 2020 the equivalent number was down to just 53%.

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Colliers expects all industrial yields to stand at 4.73%. Going forward, the firm predicts a stabilisation in 2022 and very mild outward shifts thereafter.

Given the ongoing strength of rental growth, all industrial total returns will show growth of 16.1% this year, the firm says, before slowing to a more sustainable rate of 5.4% in 2022.

John Knowles, head of National Capital Markets at Colliers, added: “It is particularly hard to forecast across all sectors over the next six months, however it does seem that industrial will continue to benefit from a demand driven market, much as it has done over the last 18 months. I have high hopes for the office sector, as confidence returns as people start to occupy their workplace again and business travel should open up to some extent over the next couple of months.”

Source: Punchline

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Six facts you need to know about commercial mortgages in the UK

Commercial mortgages are the mortgages that are acquired on different commercial properties. These properties can include shops, office buildings, industrial buildings, factories, apartment complexes, and other such buildings. Simply put it is the loan that you secure on a property that you own but it is not your residence and is being used for some commercial activity. The loan is usually used to acquire, redevelop or refinance the commercial property against which it is being taken. As every commercial property holds a different value it one of the challenges of commercial mortgage is that it has to be assessed differently for each property. To find out more about commercial mortgages you need to go through the following 6 facts about commercial mortgage in the UK.

Difference between commercial mortgage and business loans is that business loans that are usually up to £25,000 don’t need to be secured and can be acquired easily from most of the lenders across the UK. However, if you want to get a loan that is higher than £25,000 then the lenders require you to give them some sort of security in return. This is to make sure that the risks to the lender are reduced. Furthermore, there are many legal and administrative costs that are involved in the when you take a loan on a commercial property which is one of the reasons that most of the lenders don’t advise you to take this loan if the amount is less than £50,000. Some lenders have a minimum limit of £75,000 when the commercial mortgage is involved.

Most of the people are confused about how much they can borrow while when they are thinking about taking a commercial mortgage. Well if you are the owner of the property you will easily find the loan between 70% to 75% of the value of the property against which you are taking a loan. If you want to acquire a loan against an investment it will be determined by the money it is generating through rental income but it will not exceed 65% of the value of the property. If it is a business which includes stocks and goodwill etc. then the amount will be further reduced accordingly.

People often get confused about the arrangement fee and why it is being added to the loan. Most of the lenders ask their clients to deposit a non-refundable arrangement fee that is usually 1% to 2% of the actual loan. This fee is sometimes added to the total loan that you are asking for and sometimes the lenders ask the clients to deposit it along with the application form. This fee is considered as a fee of the lender for processing your loan application. Even if your loan application is rejected this fee will not be returned to you. With loans up to £ 1 million the fee is usually 1-2% but as the mortgage amount decreases this percentage increases.

A valuation fee is also a topic of concern for many people who are seeking commercial mortgage in the UK. As mentioned earlier commercial properties are far too variable in their value as compared to residential properties. If you want a loan against any residential property you will not be required to pay a valuation fee but for commercial value an expert has to visit your property and prepare a document of 20 to 30 pages indicating the current value of your property and for that you have to pay the lender or the third party used for evaluation.

Legal fees are also to be paid by the person who is seeking a commercial mortgage and they have to pay for themselves and the lender. The legal fee depends upon the complexity of the contract but they usually start for £500 for each party. If you choose different lawyers in the same firm to represent you and the lender this amount can be reduced.

Commercial mortgages are usually long-term loans and their time can range from 3 years to 25 years. If you are looking for something that is a little short-term there are loans available for that too. These are called bridging loans or property development loans and their time period is usually from a few weeks up to 2 years.

Source: London Loves Business