Interest Rates Impact on Commercial Property

Interest rates play a crucial role in the dynamics of the commercial real estate market. As global interest rates rise, the repercussions are felt across all aspects of commercial property investment.

This effect isn’t confined to a particular geographic locale; instead, it permeates throughout the global real estate markets, impacting economies from the developed world to emerging markets.

Escalated Cost of Borrowing

One of the primary effects of increasing interest rates is the escalated cost of borrowing. Commercial real estate projects often rely on substantial borrowing or leveraging. However, as interest rates rise, the cost of borrowing follows suit, making loans more expensive and subsequently deterring potential investment.

Impact on Capitalisation Rates

Interest rates also significantly influence capitalisation rates, a fundamental concept in commercial real estate investment. Higher interest rates generally lead to higher capitalisation rates, which imply lower property asset values.

Effect on Tenants and Vacancy Rates

Rising interest rates also affect the tenants of commercial properties. Increased borrowing costs could strain these businesses’ profitability, reducing their ability to pay rent, which could lead to higher vacancy rates.

Shift in Investor Portfolio

Moreover, a higher interest rate environment could lead to investors shifting their portfolios in favour of safer asset classes. The commercial real estate market may see a withdrawal of investments, leading to decreased demand and lower prices.

Performance of Real Estate Investment Trusts (REITs)

The performance of Real Estate Investment Trusts (REITs) is another crucial aspect to consider. Rising interest rates increase their borrowing costs, eating into their profit margins and overall returns.

Economic Slowdown and Reduced Demand

Lastly, an overarching concern is the potential for an economic slowdown due to rising interest rates. This slowdown could result in reduced demand for commercial space, leading to higher vacancy rates, lower rents, and diminished returns from commercial property investments.

Conclusion: Navigating the Challenges

In summary, rising global interest rates can create an intricate web of challenges for the commercial real estate market. Experienced investors understand this cycle and adapt their strategies to navigate these changing conditions, ensuring the commercial real estate market continues to be a vibrant, albeit challenging, arena for global investment.

Commercial Property Investment Outlook for 2023

The United Kingdom’s commercial property investment market has undergone significant changes in recent years, and the next year, 2023, is likely to bring even more transformations.

As the country continues to navigate the economic fallout of the COVID-19 pandemic, the future of the commercial property market in the UK will be shaped by a variety of factors, including government policies, technological advancements, and shifting consumer preferences.

Factors

One of the biggest factors that will shape the UK commercial property market in 2023 is the country’s ongoing efforts to recover from the economic effects of the pandemic.

The government’s various stimulus packages and support programs have helped to stabilize the market, but it will take time for the country to fully recover.

As a result, many experts predict that the commercial property market will remain relatively stable in 2023, with modest growth in some areas and a slight decline in others.

In addition to economic factors, technological advancements will also play a significant role in shaping the UK commercial property market in 2023.

The continued rise of e-commerce and online marketplaces has led to increased demand for warehouses and distribution centers, as well as changes in how retailers operate their brick-and-mortar stores.

Many retailers are now turning to smaller, more flexible stores that are better suited to the digital age, and this trend is likely to continue in 2023.

Another trend that will likely shape the UK commercial property market in 2023 is the growing interest in sustainable and energy-efficient buildings.

As companies become more aware of the environmental impact of their operations, many are looking for ways to reduce their carbon footprint and operate more sustainably.

This has led to increased demand for green buildings and properties that are designed to minimize their environmental impact.

The Office Market

The office market is also expected to change in 2023. Remote working has become more prevalent because of the pandemic, which has led to a decrease in demand for office space.

However, as the economy improves and people begin to return to the workplace, demand for office space is also likely to increase.

This could lead to a shift in the types of office spaces that are in demand, with more emphasis on flexible, collaborative spaces that are designed to promote productivity and creativity.

Finally, the UK commercial property market in 2023 is also likely to be shaped by changing consumer preferences.

As more people become aware of the environmental impact of their choices, many are looking for ways to reduce their environmental footprint.

This has led to increased demand for sustainable products and services, including environmentally friendly buildings and properties.

Conclusions

In conclusion, the UK commercial property market is expected to change significantly in the next year 2023, driven by a variety of factors including government policies, technological advancements, and shifting consumer preferences.

While the economic fallout of the pandemic may cause some volatility in the market, the long-term outlook for the UK commercial property market remains positive.

As the country continues to recover and adapt to the new normal, the commercial property market is likely to evolve to meet the changing needs of businesses and consumers.

The best places to stay on the Riviera

The French Riveria has always been a place that has attracted the rich and famous, with some of the most famous parties happening along the French Riveria with the Cannes Film Festival and Grand Prix de Monaco happening in the summer months. With some of the most exclusive hotels and exceptional villas & yachts, we’ve made a list of the most unique accommodations along the French Riveria. 

Benetti Oasis 140

When talking about the French Riviera, we can’t ignore the fact that Yachting and the South of France go hand in hand, with probably one of the most famous harbour being Port Hercules in Monaco. With technology and luxury constantly evolving, yachts are becoming more and more luxurious with high-tech integration, no stranger to this evolution is the Benetti 40 Oasis. The Bennetti benefits from its large windows opening the layout and letting in lots of natural light. She has a stunning beach club that comes with a pool at water level offering a stunning view. She surely offers a one-of-a-kind experience. 

Villa Paradis

Probably the most unique property on the French Riviera is Villa Paradis, with it being furnished with some of the most  luxurious fittings money can buy. The Villa offers a rich yet contemporary design with large windows offering stunning views over the bay of Cannes and the illes Lérins. The Villa is located in Super Cannes, which is a short drive away from the famous La Croisette, where the Le Palais des Festival de Cannes is held. With its design being inspired by Tuscan houses, the Villa has a warm environment that is ideal for a retreat down in the French Riviera. Unique to Villa Paradis, it comes with a 70m2 guest, perfect for accompanying staff or Friends & Family that need their own private space. With the Villa, comes a gym, also with views of the Bay of Cannes. A bespoke infinity pool to relax with Friends. A must have Cannes villa

Hotel Eden Roc

One of the most famous hotels along the French Riviera is the Eden Roc and also one of the oldest. With it being opened in 1870 with Russian Tsars, British Entrepreneurs and American movie stars, all enjoying the luxuries of the French Riviera. A key feature being its famous infinity pool offering views of the Mediterranean Sea. 

The French Riviera remains to be seen as the place to be in summer as a luxury destination, with it offering so many of the most luxurious accommodations which you will find no place else.  From steamrolling across the French Riviera on a Riva Aquariva with spray wetting your Vilebrequin shirt and shorts to St-Tropez to make it on time for lunch. To sipping on a glass of Whispering Angel from a 6-litre bottle at Anjuna beach while music fills your ears, there is nothing quite like the French Riviera.

The latest property data has identified Newquay as the fastest property seller’s market in the UK

Since the start of 2021, eight out of ten listed property which have been sold, subject to contract, making Newquay the fastest moving marketing in the United Kingdom.

The move from metropolitan to a more rural environment has been a trend in the UK property market.

This has been reflected in the latest metropolitan property data that Birmingham city centre is the worst place currently for selling. With only 18% of properties sales completing.

Thrift at Bedruthan in Cornwall
Thrift at Bedruthan in Cornwall

The latest easing of the UK government restrictions has seen the UK property market increase activity.

The increased demand in the Newquay property market has pushed prices to record highs.

Its findings reflect those made by others in the property industry.

Last week the Halifax stated there was “something of a resurgence” in the United Kingdom housing market in March. The Chancellor, Rishi Sunak, helped home buyers by extending the vacation on property stamp duty in England, Northern Ireland and Wales.

Since July, property stamp duty tax, which was suspended on the initial £500,000 of property sales in England and Northern Ireland, was extended for another three months towards the end of June.

The Halifax said that this was crucial to the yearly increase of 6.5% in home prices, taking the average to £254,606 in March.

The most popular property market after Newquay is Newton-Le-Willows (Merseyside), in which just under 82% of listed properties have sold, followed closely by Plymstock at Devon, where 81% of properties have completed the sale.

In the UK’s top ten fastest property selling markets, asking prices have hit records since the market reopened in May 2020.

Porthleven in Cornwall

These findings are supported by research conducted by the BBC last month.

The research looked at which locations consumers were searching. It revealed that Cornwall had more input consumer searches than London this year, whilst neighbouring county’s Devon had risen to the third most search and Dorest raising ten places to 10th.

Movehut has a large array of properties in Newquay

Investing in your garden can increase your property’s value

With demand rising for outside area amongst home hunters, traditional requirements like a contemporary kitchen, open-plan spaces, and clever storage have started to wane. Your garden is currently your most significant selling point, so time to give it care and love!

Buyer requirements have shifted because of the pandemic. The attraction of having a functioning garden has grown this year and last. Recent figures reveal that over a third of people purchased outdoor plants and mulch, with homeowners having acquired 322 million more plants than the past year.

Outdoor building specialists, Lidget Compton, provide their top tips for enhancing outdoor spaces to add value to a house whilst grabbing potential buyers’ interest.

Create a social space

Many people have benefited from their outdoor area in the last year, with more than half of Brits spending 84 minutes more in their garden each month compared to the previous year.

Extending the indoors to the outside has been a steady increasing trend and has increased further due to the pandemic. A carefully created outdoor space outside may be a critical characteristic that potential buyers will search for.

Look to invest in an outdoor building

Sheds, summer garden house, offices and outdoor buildings can be excellent for adding value to a home. Investing in an outdoor structure is estimated to enhance the average UK house’s property value by up to £12,000.

From storage alternatives to workshops and office spaces, installing outdoor buildings like modern garden sheds can be great for creating an extension for your home.

The serge in homeworking only makes this investment much more appealing, and 82% of land professionals claim it’s the characteristic that will add the most value to a property.

A centrepiece for your garden

A centrepiece for your garden creates a focal point. A water feature, social area, or botanical display can make a garden look more expensive.

Repainting backyard furniture or producing floral attributes using spare pots, compost, and seeds may upgrade a garden with very little investment and create an appealing visual for potential house hunters.

Keep on top of your greenery

Experts have discovered a well-kept garden can add up to £2,000 in value to a home, so investing in greenery like shrubs, trees, plants, and trees will immediately upgrade the home’s kerb appeal.

Popular blossoms and plants such as fuchsias and hydrangeas include seasonal colour. In contrast, evergreen shrubs like lavender and euonymus are simple to maintain and can make a garden look great all year round.

Add decking or paved surfaces

The garden’s presentation is as essential as the property’s inside, and with paved or decked surfaces, you can create zones that act as natural flow channels from inside to outdoor. 

Adding texture and levels to a backyard can help create an appealing aesthetic appeal for people or possible buyers to enjoy.

Updating your property’s outdoor area is vital when looking to sell your house in the current climate, especially with such a competitive marketplace during the stamp duty holiday. 

Try and experiment with different features and take advantage of the opportunity and improve your property’s worth.

Movehut has an extensive array of investment properties in London

French Riviera temping high-end homebuyers

The French Riviera is temping high-end seekers from the UK capital, according to the latest market evaluation from a high-net-worth mortgage broker, Enness Global.

Newly released data from the firm shows that now, prime property sales of £3 million and upwards account for 4% of London properties, with some 2,679 listed for sale.

Data from the Land Registry indicates that house prices in Chelsea and Kensington have increased by 28.7% yearly, while in Islington they are up 8.7% and 6.5% in Hammersmith and Fulham.

Demand for high-end London properties now sits at 12%, and with the UK property market buoyed by an urgency to complete before April’s foreign buyer stamp duty tax increase, home prices in many of London’s most prestigious postcodes have risen considerably during the previous year.

Movehut has a large array of investment properties in London.  

The French Riviera property market boasts a similar degree of high-end property availability. With 2,859 homes recorded at £3m or above. 76% of those prime properties are in the French Riviera, with the Alps region accounting for its next most significant proportion, 15 per cent, and Paris (4%) and Provence (3%) also account for a small proportion.

As a result, property at £3m and over account for 6% of the total French Property market. Not only is there a more significant property for high-end homebuyers, but buyer demand now sits at just 1% compared to 12% in the prime London marketplace.

Managing Director of Enness Global Mortgages, Hugh Wade Jones, spelt out what this meant for property buyers. 

“We see a growing interest in prime French property amongst global high-end buyers and, this is being driven by a few factors.”

He followed by saying, “In terms of property availability, it is nearly like for like, certainly when comparing the French Riviera to the high-end London marketplace. So there remains a great level of choice concerning purchasing options.”

“Across London, the impending hike in foreign stamp duty tax is causing buyers to transact with urgency and, in many cases, pay more than they have in regular market conditions. We are simply not seeing that urgency in the French market, and buyers can transact at their own speed, with this reduced level of need also leading to more space to negotiate on the asking price.”

“When you couple these market conditions with the fact that the French prime market offers far more property for your money, and a better climate to boot, it’s clear to see why high-end buyers from around the world are showing interest over London.”

If you would like to view any properties on the French Riviera you can visit Park Palace Immobilier.

How can the ownership rights of my commercial property impact a business sale?

Owning the freehold on business premises means that you own the property and the land it occupies. If you’re a leaseholder, however, you only have the right to use the premises for the period of time specified in the lease.

When selling a business, ownership rights of a commercial property are a key area of focus, and can have an impact on the sale. If you’ve purchased the freehold of your own commercial property, you’ve already made a considerable investment and benefit from the autonomy of full ownership.

So what does owning the freehold, or operating under leasehold arrangements with a commercial landlord, mean for the sale of your business?

How do commercial property ownership rights affect a business sale?

If you own the freehold for your commercial premises it means you’re the legal owner of that property, and there are no restrictions on whether or when you can sell it as part of a business sale. You can also sub-let one or more areas of the property if you need to generate additional income.

Operating your business from a leasehold property, on the other hand, means you need the approval of your landlord before the lease can be transferred to the new owner when the business is sold.

So is it better to operate under a leasehold arrangement when selling a business, or own the freehold of your commercial property? Here are some considerations.

Freehold vs leasehold when selling a business – which is better?

Pros and cons of owning the freehold of a commercial property

Pros and cons of leasehold commercial property in a business sale

Accessing advice when selling your business and business premises

When selling your business, seek tailored advice on your own situation and on how the ownership rights of your commercial property could impact a business sale. Professional business sales brokers with extensive experience of facilitating successful business sales can support you throughout the sale of your business.

Read our in-depth guides on commercial properties, from selling your property to finding the right property to buy.

Should I incorporate virtual property viewings permanently?

The health risk posed by the coronavirus pandemic prevents commercial vendors from presenting vacant office premises to prospective tenants and commercial property buyers from attending viewings. As this pushes the market to a standstill, commercial property agents can shape the behaviour of consumers by offering safer ways to visit properties for sale by virtual property viewings, writes Keith Tully of Real Business Rescue.

The Q3 2020 RICS UK Commercial Property Survey shows that -33% of respondents reported a decline in tenant demand at the all property level. Occupier demand for retail space exhibited a continued drop of -73%, while demand for office space hovered around -66%. As nearly 80% of respondents on a national level reported a downturn in market conditions, this underlines the need for creative thinkers to assemble innovative solutions to maintain market activity and encourage consumers to continue their property search safely.

As trading restrictions during the first Covid-19 lockdown in March 2020 resulted in the shutdown of the property market, the commercial sector is absent of vent up demand, as experienced by the residential sector. Commercial estate agents are embracing virtual property viewing facilities to provide consumers with access to a multitude of properties from the comfort of their own homes.

Virtual viewings during Covid-19

The rise of virtual property viewings has undoubtedly been fuelled by the coronavirus pandemic as demand for remote viewings reaches unprecedented levels. As employees on furlough temporarily reduce workforce numbers and flexible working makes way for working from home, businesses may consider downsizing office premises, which in turn – reduces overheads. By extending control to employees over their working arrangements, remote working and working from home could be implemented over the long-term and embraced as the new norm.

Virtual property viewing software provides the facility for 3D interactive tours as an alternative to physical viewings. By inserting this option to commercial properties for sale, physical contact can be reduced, and prospective buyers genuinely interested in proceeding with the sale can be quickly shortlisted, filtering out non-proceedable buyers. By providing this self-serve feature, employees can streamline operations, redistribute time allocated for physical house viewings and maximise time spent interacting with serious buyers.

Do virtual viewings replace physical viewings?

As virtual viewings present the physical world through a screen and at any given location and time, this can be convenient for all three parties, the agent, buyer and seller. By presenting an unfiltered view of a property without commentary from multiple visiting parties and the vendor, selected buyers may prefer visiting a property virtually. By cutting out the physical commute, interactions and pleasantries, the property viewing experience can rapidly speed up.

As demand for virtual property viewings increases, estate agents will need to adapt their offering to prevent their services from becoming redundant. By seizing the opportunity and finding alternative ways to communicate the pros and cons of the commercial property in question, estate agents can help prospective buyers act logically and consider their decisions with an open mind. Estate agents are instrumental to the customer onboarding process by showcasing expert property knowledge and an extensive understanding of the commercial property market. Omitting this from the early stages of customer interactions can be fatal. By complimenting virtual viewings with expert commentary, estate agents can encourage buyers to act now, rather than wait to act post-Covid-19.

Providing a guided virtual viewing can help speed up the sale of commercial property as virtual viewings can be worked around busy schedules and increase viewing capacity which would otherwise be capped to fit around the working day and the vendor. As more commercial estate agents embrace the virtual approach, the investment in such services will likely continue long-term which will also be influenced by the Covid-19 health risk, the financial position of estate agents and the personal preferences of prospective buyers.

Read our in-depth guides on properties, from selling your property to finding the right property to buy.

Investment expected to increase across Asia-Pacific in 2021

Confidence in commercial real estate is on the increase across the Asia-Pacific area, with 2021 set to watch a 5% to 10% growth in investment, according to CBRE‘s latest Asia-Pacific Investor Intentions Survey.

The poll conducted late last year asked over 450 mainly Asia-Pacific based investors a variety of questions on their purchasing desire and favoured strategies, markets and sectors for 2021.

It was reflecting overall progress in market sentiment fostered in part by the recent commencement of vaccination programmes in several countries around the world with an upbeat fundraising environment that has witnessed US$59 billion of equity raised by Asia-Pacific-focused real estate funding between 2018 and 2020. The survey found that 60% of commercial real estate investors across the Asia-Pacific region intend to buy more real estate in 2021, the highest amount since 2016.

Institutional investors demonstrated tremendous confidence in the recovery, and logistics property was preferred for the first time since polls began, followed by offices. Data centres remained the most desired alternative asset category, followed by cold storage, the two sectors benefiting from structural shifts in the economy and the consequences of Covid-19.

Investors had an apparent preference for core, and opportunistic/distressed purchasing opportunities, and nearly 50% of investors had adopted ESG criteria in their investment efforts and strategies.

The recent commencement of vaccination programmes across the world, as well as a rise in availability caused by disposals by developers and property funds, led CBRE to forecast a 5% to 10% year-on-year rise in investment volume in 2021.

Investors believe that the pandemic will not have a detrimental impact on long-term office demand in the Asia Pacific region. It will lead to a stronger emphasis on environmental, social, and corporate governance (ESG) criteria in investment.

Movehut has an extensive array of investment properties in London.   

Brent McGregor, executive chairman of CBRE NZ, said that Asia-Pacific investors had a greater interest in cross border prices.

“Ongoing travel restrictions are not discouraging Asia-Pacific investors from displaying a strong interest in cross border investment, with more than 70% of respondents intending to buy assets overseas in 2021,” he explained.

“With Asia comprising the pandemic relatively well in contrast to North America and Europe, more investors have recognized markets over the area as their preferred choice for investment this year.”

Therefore he said New Zealand was likely to continue to be an attractive destination for overseas investment.

Zoltan Moricz, senior manager of research for CBRE New Zealand, said, “Buying activity in New Zealand could receive a more significant boost than other parts of the world due to our success combating Covid-19 and the resultant resilience of our economic and social environment. This could shift some investors’ perception of New Zealand towards being a core global market and lead to investment volume growth in the order of 10+% in 2021.”

UK property industry slows as the conclusion of tax break looms

The United Kingdom property market softened greater than anticipated in January as RIC‘s surveyors reported a fall in enquiries from potential homebuyers for the first time in eight weeks. The most recent signal the imminent end of the stamp duty vacation is weighing on demand.

Closely watched indices of housebuyers interest, in addition to readings on new listings and consented sales, were all negative in the past month, according to statistics released on Thursday from the Royal Institution of Chartered Surveyors.

Read our in-depth guides on properties, from selling your property to finding the right property to buy.

“The message from January’s RICS survey is that housing market activity is entering another lull,” explained Andrew Wishart, property economist at Capital Economics. “The lockdown and the looming end of the stamp duty holiday have caused a sharp drop in buyer demand and sales.”

RICS index that monitors the amount of brand new listings dropped to minus 28 at the beginning of 2021. The first time a fall since May 2020. At the same time, another index reported a decline of minus 38 of new listings.

The tepid figures follow Nationwide’s January house price index, published last week, that captured the very first month-on-month regeneration since the authorities introduced the residential property tax break.