Commercial landlords eye growth despite inflation woes

Most commercial landlords in the UK are optimistic and plan to expand their portfolios in the next year, despite the challenges posed by inflation and mortgage volatility, a report reveals.

The research from mortgage lender Together, entitled Opportunities and Outlook: The future of commercial property, is based on a nationwide survey of buy to let landlords who own four or more properties.

It also features an analysis of the commercial sector for the next three to five years.

According to the report, 34% of the surveyed landlords are preparing for further growth in the next 12 months, while 68% feel positive about their business prospects ahead of 2024.

A quarter of them intend to refinance their properties to support their goals.

‘Cautiousness in the commercial market’

Together’s group channel development director, Chris Baguley, said: “The short, sharp shock in interest rates since the Covid years triggered some cautiousness in the commercial market while investors were trying to predict where the peak would be.

“With rates settling, while there is still an overall flattening; activity is returning as the sector reacclimatises to the new environment.

“At Together, we are still funding more than a thousand completions a month, highlighting the underlying appetite in the market.”

He added: “What continues to be apparent is the clear optimism and enduring health of the commercial sector.

“The winners of 2024 and beyond will be those who are able to seek out new opportunities, spot where best to create value and use the right financing to capitalise on emerging growth sectors.”

Invest in the UK commercial property market

The lender’s report also shows that 58% of the landlords would advise others to invest in the UK commercial property market now, despite the events of the last year.

This is because 42% of them have seen a rise in revenue in the last 12 months, and inflation has dropped below 5% in Q4 2023.

However, not all landlords are bullish about the market.

The report indicates that 44% of them are reducing their risk and downsizing their portfolios, while 16% are exiting the market altogether.

The are also some regional and behavioural differences among the landlords with those in London, West Midlands and North West England more likely to buy more properties in the next year, while 10% of them are influenced by social media and online property influencers.

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