UK commercial lending to surge to £118bn by 2028

A report from Together, Opportunities and Outlook, said that by 2028 commercial lending would increase by 32 per cent to total £118bn. 

The prediction was made by Intermediary Mortgage Lenders Association (IMLA) economist Rob Thomas, who said low interest rates had driven growth and development in the property sector and the recent rise would create a challenge. 

However, he said in the medium to long term, there were signs that property professionals were “committed to developing their portfolios” and some were using the fall in property prices to expand. 

Thomas added: “The improving outlook in our macroeconomic forecast, coupled with supportive structural factors such as rising population and constrained supply due to lack of available stock, will allow for a recovery in property prices and markets from 2025, picking up momentum from 2026 onwards.  

“This in turn supports a recovery in lending to these markets despite what has been a tougher financial environment.” 

Opportunities in the commercial lending

Looking to the year ahead, 23 per cent of the 500 people polled for the report said student housing would provide investment opportunities. This was followed by 21 per cent who said housing developments and 19 per cent who felt luxury residential properties would offer opportunities. 

Some 58 per cent of respondents also said they would recommend that others invest in the UK commercial property sector now, despite the current landscape. 

Nearly three quarters, 72 per cent, of those with a portfolio of properties said they felt positive about the outlook of their business this year. Some 67 per cent of professional landlords were also optimistic, as were 70 per cent of real estate investors. 

More than two fifths, 44 per cent, of respondents are planning to de-risk their investments by shrinking their portfolios. Of those, 48 per cent intend to do so in three to six months, while 23 per cent plan to do this sooner. 

Lending challenge 

Inflation is expected to be a challenge to those in the commercial sector this year, as cited by 30 per cent of respondents. Meanwhile, 27 per cent pointed to high interest and mortgage rates. 

Some 29 per cent of investors polled said falling property prices could make obtaining a loan harder. Despite this 18 per cent said they were looking forward to pursuing retail opportunities, 17 per cent said housing developments and 16 per cent said student accommodation. 

Further, 23 per cent of respondents said the commercial sector was improving and there were more opportunities. Supporting this view, 18 per cent said the possibility to generate more money was high, while 16 per cent said lower property prices helped them to secure deals and new opportunities. 

Chris Baguley, group channel development director at Together, said: “As we look at the UK commercial property landscape, the scope and diversity of the opportunities is impressive. Whether its student housing, housing/residential development or repurposing retail and other larger sites, the next few years are going to provide significant growth for the UK commercial property market.  

“The optimism of the sector, combined with the economic recovery, mean those investors that are well poised with the right finance support will ultimately be in the best position to capitalise on these opportunities.”