Despite some commentators of gloom and doom the commercial and residential property markets continue to hold up. There are challenges in speed of transactions and supply of properties but sales and lettings continue well. We are seeing much of the available stock of commercial property going under offer both for sale and to let. We are even experiencing “final and best bidding” on some properties with a number of potential buyers competing.
Recently we have marketed a site in Stourbridge and had 4 proceedable offers within 4 days. This is encouraging although the supply of suitable properties diminishes and there is a lag on new development although signs are now showing with new commercial development and refurbishments coming forward.
The Bank of England’s Financial Stability Report in July concludes that there will be a period of uncertainty and adjustment following the result of the referendum. It will take time for the United Kingdom to establish new relationships with the European Union and the rest of the world. Some market and economic volatility is to be expected as this process unfolds.
The UK commercial real estate market, which had experienced particularly strong inflows of capital from overseas over recent years. Foreign investors accounted for around 45% of the value of total transactions since 2009. Valuations in some segments of the market, notably the prime London market, had become stretched.
Foreign inflows of capital to the UK Commercial Real Estate market fell by almost 50% in the first quarter of 2016. More recently, share prices of real estate investment trusts have fallen sharply, reflecting the risk of future marked adjustments in commercial real estate prices.
The gloom and doom for commercial property reported in the national press is one thing, reality in our area of the country is another. The Brexit decision is actually improving the local market for a number of reasons, shortage of good quality offices and industrial with demand far in excess of supply, Funders are still willing to lend to businesses premises for owner occupation and a further interest rate cut maybe on the horizon.
For us in our area of the Black Country and Worcestershire there has never been a better time to buy or, particularly, to sell business property despite the national property press scaremongering and focusing on London and the south east. This is not the same for office users, local manufacturing business and industrial occupiers who are expanding and who have been looking for the right commercial premises to move into and buy over the last 9 months in this area.
Much has been written about the effects of the referendum result, but ultimately it will take time for it to be fully understood. The majority of buyers are using cash and were prepared to take a pragmatic and long term view; with interest rates lower for longer, negative returns on government bonds and heightened volatility in the stock market, it’s not hard to see why. For many it is the ability to own and control a tangible asset which can provide a steady income flow whilst acting as a hedge against inflation.
Properties which are well located, well let or offer potential to add value have all continued to attract keen interest, resulting in some truly excellent prices and competitive bidding. Looking ahead we expect this to continue. Changes in SDLT, which has resulted in lower rates for commercial properties under £1 million, an increase on residential property by 3%, together with reductions in tax reliefs for buy-to-let has further enhanced the appeal of commercial property investment.
So as we go into autumn it is a good time to look at buying or selling commercial property, good investor demand fueled by business growth and fund availability makes it the right time to consider the options.