CFB UK Release Commercial Finance Trends for Q4 2014

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East-Anglian based commercial finance broker CFB UK has released an insight in to commercial finance trends from Q4 2014.

CFB UK
2015 has started positively and the year as a whole looks promising. Might we see interest rates that start with 1% plus margin, re-appear in the commercial finance world? Indeed, would that be a good thing for the industry or the country’s economy?

Overall there has been an uplift in enquiries across all sectors of commercial finance with property development finance continuing to lead the charge. What is clear from our experience is that smaller and medium size developers are getting in on the act and developing a lot of brownfield sites and using PDR (Permitted Development Rights) to convert vacant - often old, tired and no longer fit-for-purpose - office blocks into residential accommodation. 2014 also saw a lot of mothballed developments being reinstated

The commercial investment market showed an upward trend in the latter quarter of 2014 as professional landlords looked to balance their residential portfolios with commercial purchases. Purchases in the owner occupier sector continued to grow with obvious optimism in regards to future growth and strength in UK economy.

Whilst retail is not particularly strong, restaurants and other hospitality are doing well – we have had a lot of pub enquiries as people look to take-on badly performing units from the majors and turn them into more attractive food led pubs. A closer look at the figures broken down by sector has shown that the Dental market in particular has undergone a positive shift. We have also had significant interest from businesses who currently rent their premises looking to purchase.

In regards to commercial lenders, we have seen definite movement of margins above bank base or LIBOR, with interest rates for strong financial proposals starting at just under 2% for the first time in a while. In addition, 2014 saw some lenders considering loan to value (LTV) rates of up to 80% within the commercial finance sector; rates scarcely seen since 2006/7.

The clearing banks, while retaining the best rates, remain cautious and are still very selective about what they will and will not lend on. However, for clients driven by ‘getting the deal done’ rather than chasing the best rate there are plenty of lenders to choose from.

On the development side, lenders will now support projects with facilities of up to 90% of cost (i.e. land or site costs plus build costs) so long as debt is less than 75% of the end value of the project. In addition, some lenders are now using the end value as their reference point and almost ignoring the current value of the site on the basis that they will always get their money back if the site can be brought to completion.

Moreover, we now have a growing portfolio of private investors looking for projects to fund on a shared equity basis. This means that developers who have a site but to capital to put towards it can get their project financed – so long as they are prepared to share the profit margin at the end.

2015 has started positively and the year as a whole looks promising. Might we see interest rates that start with 1% plus margin, re-appear in the commercial finance world? Indeed, would that be a good thing for the industry or the country’s economy?    

CFBUK
CFBUK is provides innovative commercial mortgages for businesses and property investors. It is a market leading brokerage that takes the hassle out of obtaining commercial and business finance.

CFBUK is an independent, Whole of Market Broker that can deal with all lenders operating in the UK. With over 20 years’ experience and a famous, no-nonsense approach, the service they provide is fast, efficient and focused on results. CFBUK is not influenced by lenders who pay brokers high introduction fees. They charge their clients a 1% success fee and are not remunerated by lenders at all.

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Hana Ballard
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CFB UK Commercial Finance