Major investor optimism in UK commercial property increasing
Optimism in the UK commercial property market, especially in London, is edging upwards but is still at levels well below a year ago, according to new research.
There are glimmers of hope in several UK locations, states the latest Commercial Property Confidence Monitor for Lloyds Bank Corporate Markets and investment intentions among major property businesses are at their highest since the survey began.
But fund managers and advisers herald a note of caution as retail business failures and economic factors cloud the horizon.
The survey reveals a two tier UK market focused firmly on London and the South East, with investment fuelled by equity funding. But, there are some signs that investors may turn to regional markets for value growth and that greater acceptance of alternative funding could unlock opportunities nationwide.
Confidence in the UK commercial property market remains stable, according to the report, and while there is continued uplift in sentiment, this is now at low levels compared to a year ago.
Confidence is strongest among major businesses, 82% of which intend to increase their exposure to property in the next three to six months, the highest level recorded since the Commercial Property Confidence Monitor was launched. Confidence is also biased towards London.
Against this backdrop, Lloyds Bank Corporate Markets polled its quarterly survey sample of 449 financial decision makers across the property world on the sources of funding they anticipate to use in the next 6 to 12 months. Less than half, 46%, of medium/large businesses and a similar proportion of fund managers state they would use bank debt to fund their investments. This rises to nearly two thirds, 65%, for major businesses but only around a quarter, 27%, for small businesses.
More than a quarter, 28%, of medium/large businesses mention their own equity, third party equity or cash reserves as their first preference for funding, together with a third, 32%, of fund managers, around a quarter, 24%, of major businesses and two fifths, 41%, of small businesses.
‘This represents a fundamental shift in the dynamics of property funding. Three years ago we would have expected 80 to 90% of the market to be relying on bank lending. While we continue to lend on property, investors are increasingly using equity to grant them to execute deals quickly and with certainty, often with a view to securing the right funding solution later,’ stated Lynda Shillaw, Lloyds Bank Corporate Markets’ managing director of Corporate Real Estate.
Beyond debt and equity, the survey revealed a small appetite for alternative forms of funding via capital markets and other methods, even though these are mentioned as first options by fewer than one in ten, 11%, of all respondents.
‘We believe the far smaller appetite for funding solutions beyond bank debt and equity reflects to some extent, a lack of awareness in the market generally about the alternatives available to property investors as prior…
More source:
Major investor optimism in UK commercial property increasing ...Investors optimistic on upbeat economic data - CNN Money
Business optimism boosts growth hopes - FT.com
HONG KONG: J.P. Morgan Investor Confidence Index shows ...
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Submited at Friday, August 5th, 2011 at 5:00 pm on Finance by alliana
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