The lowdown on Commercial Lending: Where is the market headed next?

Our Chief Commercial Officer, Haydn Thomas, talks to Mike Davies at Yorkshire Building Society to discuss the lowdown on commercial lending, the impact of Covid 19 and where the market is heading next. Here are some of the key takeaways:

 

The trend of moving from renting to buying

Despite what’s happening in the market due to Covid 19, there has been a surge in demand for buying properties instead of renting. House prices have recovered well, and investors are keen to take advantage of these opportunities to expand their property portfolio. This demand reflects what we’ve seen at Cornerstone Commercial Finance, increasing clients seeking bridging loans for purchases or refurbishments and conversions.

 

The role of banks moving from a relationship model

Over the years, banks have stepped away from a relationship model with their clients, which has left buyers seeking help from Commercial Finance brokers. Long-standing relationships and personal service are important parts of a brokers role, especially where brokers can plug the gap of the old-fashioned bank manager model. At Cornerstone Commercial Finance, the key aim is to provide a comprehensive service to the client, from introducing the best solicitors, lenders right through to completion. This change in bank relationships means that it is more important than ever that commercial finance brokers help SMEs across the country.

 

What Cornerstone Commercial Finance look for in a lender

Good working relationships are key to Cornerstone, and an important part of this is to provide consistent service throughout the completion. Some lenders are becoming tech-heavy which can sometimes take out the person to person contact. Having someone to talk to during commercial deals is important for all parties to clarify and ask questions.

 

The increase in staycations

Some people may still be sceptical about going abroad for a while following the pandemic, so there has been a huge increase in people looking to holiday in the UK. Investors could see this as a golden opportunity to expand their buy-to-let portfolio and start investing in holiday lets.

 

Trends in the wider buy-to-let market

Due to tax changes and the increase in Limited companies, buy-to-let has become the busiest side of lending in the last few months. There has been a shift where investors who originally invested in commercial properties are now looking to build their portfolio around buy-to-let and semi-commercial properties.

 

What the market holds for 2021 and beyond

As more people are starting to look more flexible working, we could see an increase in shared workspaces, which could lead to fewer office lets. There could also be more opportunities for investors to purchase commercial properties at much lower prices when government support, such as the furlough scheme, comes to an end. Business failures could result in pubs and high street retail becoming vacant, with investors looking to convert these buildings into HMOs or social housing.

 

Advice for brokers entering the commercial market

It is important for those entering the commercial market to start with having good connections in the industry. Being linked up with contacts who can offer additional services such as insurance or protection will build your reputation and allow you to provide the best service to your clients.

It’s also a bonus to know of individuals outside of the broker community, such as tax advisers or solicitors, to provide a better service to clients.

Listen to the podcast here.