Feature

Innovation 'essential' in commercial property finance market this year




The latest Bridging & Commercial poll has found that a hefty 66% of brokers expect to see more innovation in the commercial property finance market this year.

As a result, Bridging & Commercial sought the views of leading industry figures to find out what new innovations we may see in the market this year.

Poll

Industry responds

“Innovation will be essential, because — during 2019 — we will see commercial rents staying broadly flat, impacting average investment returns,” said Rob Lankey, director of commercial investment at Shawbrook.

“The retail sector will continue its bumpy ride, experiencing further falls in rentals.

“Therefore, investment in alternative property will come to the rescue, counteracting the malaise in retail.

“These alternatives are believed to offer investors compelling returns, greater security and lower risks of default.”

Stephen Burns, director at Adapt Finance, added that products seemed to have blended into “much of a muchness” across many lenders and there had simply been a reduction in rates universally.

“Lenders do need to be more innovative to secure business.

“Some are — be it in creating niche products or adapting their processes to speed up the process.”

Dan Brown, senior business manager at Commercial Expert Ltd, believed that there would be more innovation this year as lenders would be keen to spread their risk on what they saw as an oversaturation in the London property market.

“The market has slowed due to concerns over Brexit and low yields versus valuation and debt quantum.

“We know that lenders are starting to look seriously at expanding in the commercial field and are strengthening their top teams.

“This will lead to them coming up with more innovative product suites and systems.”

Chirag Shah, CEO at Nucleus Commercial Finance, said that he expected the co-working space trend to continue.

“I believe this development will also help sustain the commercial property market in the short term.

“In the long run, uncertainty from Brexit, major businesses downsizing or relocating their headquarters outside [the] UK, newly constructed offices coming on the market and a general trend towards flexible working is going to represent a challenging environment for the commercial office space.”

Ludo Mackenzie, head of commercial property at Octopus Property, didn’t see innovation having any material impact on the commercial lending sector this year.

“We expect political uncertainty to cause a near-term reduction in deal volumes, which may in turn lead to rate pressure as lenders compete for few deals.”

Technology

Will we see innovation in technology this year?

“First and foremost, there will be an increased use of online platforms to make it easier for clients to access finance,” said Dale Jannels, managing director at Impact Specialist Finance.

“These will help match investors — who are looking for a higher return on their money — with clients needing to borrow, for example, deposits through property funds.

“Continuing the tech trend, I foresee increased collaboration between lenders to provide cohesive and complete client solutions.

“This ties into the continued emphasis on service as ‘speed to the money’ [and] is increasingly important in securing favourable terms on a purchase deal.

“The significance attached to faster access to finance could also see an increased use of bridging finance to unlock the chains in a market which is showing signs of slowing down.”

Stephen added that in terms of using technology to speed up the process “it’s between a rock and a hard place”, as the short-term lending space was often all about talking a proposal through and details could be missed when submitted via a platform.

“Relationships are key and online submissions don’t always allow these to prosper.”

Dan concluded that Commercial Expert had seen the commercial property market drift away from the tight underwriting requirements of the high street banks, which have become more strict on criteria.

“This has led to the growth of ‘the challengers’, who are coming up with new and exciting products to help the commercial property market grow. 

“We have recently seen the birth of digital banks and we personally think the digital banks will be the next big thing, as challenger-style lenders switch to digital applications/e-signatures and online KYC verification.”

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