There have been a series of major shifts in the commercial property market over recent years. The pandemic accelerated changes to office use as flexible working grew. It also accelerated a decline in many areas of retail as shopping increasingly went online.
A series of behavioural consumer changes affected several niche areas from gyms affected by a shift to home exercise, to cinemas affected by the boom in the streaming platforms. And tightening of regulations on energy efficiency of commercial buildings has put a further squeeze on landlords.
As a crowded country, inevitably, this was matched by a growth in demand for other property uses. Warehouse space has been much in demand. And in many parts of the country, particularly the southeast, there is a great shortage of affordable housing.
This then suggests an inevitable re-purposing of much commercial property. The difficulty is that as properties are repurposed, their value shifts and they fall outside of the scope of finance targeted at specific property sectors. This comes at a time when interest rates are high and refinancing cheap pandemic era loans will be extremely difficult (and painful) for borrowers. We can expect a rise in receiverships, property related administrations, and distressed property deals over the coming year.
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