January 2018
By Paresh Raja, CEO, Market Financial Solutions
In the immediate aftermath of the EU referendum result, there were fears the UK economy would find itself amidst a period of financial discord, stalling productivity and declining investor confidence. There were concerns that the property market would also be negatively affected, reducing the amount of capital being invested into the nation’s residential and commercial real estate.
However, 18 months on, the commercial property market has not only recovered from the initial shock of Brexit but it has taken major strides forward – 2017 marked a year of record-breaking transactions and sales. According to one estimate, commercial transaction volumes reached £53 billion at the close 2017, a 15% increase on the volume of sales recorded in 2016.
Foreign capital has played a defining role; international investors were responsible for half of the country’s commercial property investment, with this figure rising to 80% in London. The capital’s allure as a historical city for commerce and banking has fuelled property investment, with investors evidently optimistic that London will remain a global financial hub in the years following Brexit.
Based on the resilient performance of the UK’s commercial property market, forecasts for 2018 are already predicting another positive year. For the sixth year in a row, transaction volumes in the UK property market are tipped to exceed £50 billion in 2018 as institutional and retail investors seek to take advantage of the low pound and new development opportunities on offer.
As a source of fast finance for property investors, 2017 was also an impressive year for the bridging industry. In Q3 2017, the value of loans written by ASTL members had increased by a massive 38.9% when compared to the same three-month period the previous year. Moreover, applications to bridging lenders grew by 45.5% in Q3 2017 when compared with Q3 2016. It underlines the sharp rise in demand for bridging loans, with short-term finance patently proving an increasingly popular option among many property investors.
Backed by years of experience lending for real estate opportunities, MFS is no stranger to the UK’s burgeoning commercial property scene. Over the past decade, we have arranged tailored bridging loans for the acquisition and development of office buildings, shopping centres, retail businesses, hotels, nursing homes and religious institutions. Moreover, we have also provided corporate finance for airline groups, oil and gas companies, agribusiness and manufacturing companies.
With a wealth of experience in commercial finance, MFS is ideally positioned to respond to investor demand in 2018. As clarification is obtained as to what Brexit will mean for the UK, investors will benefit from a better-informed understanding of the country’s long-term economic positioning. But in the meantime, investors are not allowing on-going negotiations with the EU to derail their objectives; a nationally-representative survey of UK investors commissioned by MFS and conducted at the beginning of 2018 found that 77% of investors think Brexit is unlikely to affect their long-term investment strategy. In light of this, MFS will support investment into commercial property, ranging from office developments in the capital to the construction of new buildings in regional areas, by offering investors access to fast and flexible finance solutions.