Business Certainty is what Businesses Require When it Comes to Commercial Property Lending

Posted by Alternative Bridging Corporation on 6th January 2023 -

After the past few years, one could easily be forgiven for thinking that there is no such thing as normality for the UK economy; indeed, perhaps normality now equals perpetual turbulence and turmoil and we need to just get used to it.

At the time of writing, the statement from the Office of Budget Responsibility (OBR) has been put back to 17 November, when a new budget will be unveiled. While, as yet, we know very little of what is likely to be announced by Chancellor Jeremy Hunt, the expectation is that taxes are going to rise and public spending will be cut.

Regardless of economic conditions, what businesses generally want more than anything is a certainty when it comes to commercial property lending. They want to have an idea of how much their costs are likely to be over the coming year; if they take on staff, what will they need to budget for? That way, businesses can plan for the future and invest. One can only hope that the government plan will be sensible and so businesses can operate on the basis that things won’t suddenly change in six weeks’ time.

With all that has been going on, it was somewhat surprising - and heartening - to read the recent commercial vacancy data from the British Retail Consortium (BRC). It reported that in the third quarter of 2022, the overall vacancy rate for commercial property across Great Britain fell to 13.9%, which was 0.1 percentage points better than Q2 and 0.6 percentage points better than the same period last year. This was the fourth consecutive quarter of falling vacancy rates.

Furthermore, all locations saw improvements in vacancy rates in Q3: shopping centre vacancies fell to 18.8%, down from 18.9% in Q2 2022, while high street vacancies decreased to 13.9% in Q3, compared to 14.0% in Q2. Retail park vacancies totalled 9.7% in

Q3, a 0.5 percentage point improvement from Q2 2022. Also, it remains the retail location with by far the lowest vacancy rate.

Across the country, London, the South East and the East of England had the lowest vacancy rates, while the highest rates were in the North East, followed by Wales and the West Midlands.

The BRC saw a “sustained level of recovery” at a time when things were becoming harder economically. It appears that a number of struggling businesses were finished off by Covid and so there are fewer firms left in dire straits, with a decrease in store closures compared to the same time last year. The BRC also reported that independent businesses in particular have continued to do well as consumers remain loyal to their local high streets.

Of course, no one is in denial about how things will get tougher before they become easier and the winter looks likely to be a testing time, but it’s encouraging to see that local high streets are proving resilient. At Alternative Bridging Corporation, we deal with a lot of brokers and their high-street landlords and/or retail clients. They’re telling us that, nearly a year on from the last lockdown, many challenger banks and term lenders still haven’t recovered their appetites to lend to those on the high street, and if they are, have issues completing in a timely manner.

By contrast, we’re doing deals every week on the high street. These are a mixture of bridging loans, often to refurb a commercial property store; term loans to buy freeholds, or our Alternative Overdraft, to release capital for acquisition purposes. We know that businesses require certainty and we look to provide that when it comes to commercial property lending.

We recognise that the local high street is a vital part of the economy and as such needs to be supported. While times are tricky at present and look set to be challenging for a number of months yet, it’s important not to overreact and ignore strong businesses and their funding needs.

 Read the article on our website here.