Finanze Daily Digest - 23/11/2022

The Brief: Some commercial lenders have reduced appetite as many are unsure where mortgage rates and property values will trend, according to a report by Financial Times. Commercial property investors were hopeful that business activity would rebound after COVID restrictions were lifted but soaring energy costs and inflation have instead negatively impacted property deals, according to the report.

Why It Matters: The lending environment is different today compared with last year. The UK commercial real estate lending report - year-end 2021 by Bayes Business School reported a 48% uptick in loan origination in the previous year, or £49.7 billion, the highest volume since 2015. Lender appetite was also healthy, recording a 94% willingness to lend to the prime office sector.

Finanze Foresights: During the peak of the pandemic within the commercial mortgage market lenders were more discriminating against industries that risked default. But as lending appetite resumed, it turned out that increasing interest rates and a less favourable economic outlook have made sentiments sour again. Commercial property investors may find good deals in the market, but getting a suitable lender may be a challenge unless commercial borrowers have a strong balance sheet and tenants that are less affected by market volatility.

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