Increased demand goes hand in hand with increased finance availability

According to recent reports and statistics, the demand for commercial property is really starting to see increased improvements with activity in the UK commercial property sector rising from 5.1% in April to 5.8% in May. The main reason for this is down to the improving availability of finances. Many believe that the debt which was held against commercial property in the UK has fallen so significantly in 2012 that banks have now finally been given the opportunity to start to grow their balance sheets again, which has led to increased lending. This improving availability of finance has also seen increased finance available for commercial developments for the first time since the crash.

However, these latest reports and surveys do not take into account the new lenders that have come to the market. Tom Lax from Morgan Pryce believes that; ‘The years since the crash have left a gap in the market and allowed new banks, insurance firms and private equity sources to enter the market and establish themselves which may have led to slightly better results.’

The story outside London has always been far worse since the crash; with the absence of debt finance for commercial property almost being non-existent. However, as investors in the London commercial property market look to secure their finance and look to acquire prime assets, they have started to experience yields starting to fall quite dramatically, with some London office yields falling as low as 2%. This has subsequently seen investors having to put their own cash into the secondary markets outside London, which has gradually let to an uplift in values, which in turn has led to the banks’ lending again.

Morgan Pryce is a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.