Lenders struggling with deal flow warned of the risks of expanding regionally



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Last week, Bridging & Commercial teamed up with Ortus Secured Finance in a live event to discuss how the UK real estate market is performing across all sectors and what the key trends are.

As part of its weekly virtual roundtable series, Medianett’s editor Beth Fisher – along with Ortus Secured Finance’s managing director, Jon Salisbury, and associate director for lending, David Foster — hosted an hour-long debate on the factors underpinning the regional differences in house price growth, how this is affecting lending decisions, and whether differing policies towards the pandemic are hindering lenders’ ability to expand regionally.

The panel also included Jason Thompson, divisional director for professional services in Belfast at Savills; William Biggin, director of valuation and advisory services at Colliers; Andy Clark, director of valuation and advisory services at Colliers; and James Cunliffe, director of valuation at Strutt & Parker, covering expertise across London, Northern Ireland, Manchester and Glasgow.

During a time when there are differing policies towards the pandemic, Jon explained that finance providers looking to work in new areas need to utilise local knowledge. 

Before Ortus entered Northern Ireland in 2014, for example, the team often travelled there to get comfortable and build their network. “You’ve got to understand your market to the best of your ability and partner with people that really know their stuff,” he said. 

He warned that some lenders may be tempted into a new market, especially if they are struggling with deal flow, but emphasised that it can be “very risky”.

However, he welcomes new finance providers in underserved areas, such as Northern Ireland. “As a lender, going into an area and being one of only a few is risky, because you need people to refinance you; you need an active market and clients to have other options and for it to be generally healthy.”

David added that the local intel of team members and third parties is frequently relied upon.

“Coming out of the pandemic, we’ve seen some really great operators in areas such as Cornwall,” he noted, where he has made use of the knowledge of experts in those locations to get deals over the line. 

On the topic of how the end of the furlough scheme, changes to how we commute, and the rise of flexible working is impacting the evolution of city centre real estate, Andy is of the opinion that there will be increased interest in smaller and more flexible office space in Scotland, predicting that the serviced office space market will do well, but it will take some time to settle down. “There will be no shortage of demand to convert office space into residential,” he added.

William commented that, in Manchester, tenant enquiries for regional offices had “really picked up” in recent weeks. 

He divulged that occupiers are looking for collaboration areas and something called “core and flex”. 

“Tenants are looking for a core amount of space that they can commit to a lease, but a landlord that can also offer them flexibility as well so, if in 12-18 months’ time they’ve got another 20% of their staff back in the office, they can easily find that additional room in the building.”

Recently, house price data showed that London reported the weakest growth in England. James feels that while there has definitely been a drive out of the capital, the market has performed well.

In the prime central London market, he detailed that prices have pretty much held where they were through the pandemic, despite a lack of overseas buyers. “I think that underpins the strength of the London market.”  

When asked what asset class is the current investment option of choice, Jason responded that, from a Northern Ireland perspective, it was the last-mile logistics sector.  

“I think supply chains for Northern Ireland is a massive issue, and being able to have the free flow of products, certainly between the North and South of Ireland, [will mean that] those last-mile logistic and distribution centres are going to be very hot going forward.”

The full virtual roundtable can be watched below.

 

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