There are reasons for optimism about the state of the commercial real estate (CRE) market in 2025 and beyond.
This is what Tom Renwick, head of business banking at Atom Bank, said. He noted: “I expect a recovery in SME lending, with borrowing stimulated by lower interest rates, allowing businesses to expand and invest.”
He added: “While there is optimism about improvements in CRE, we should expect to see notable differences in recovery across sectors. Tourism has performed incredibly well in London this year, and with expectations of higher inbound overnight stays, investors may be more supportive than usual of hotels.
“Meanwhile, the rise of flexible remote working arrangements will have an impact on the office market, although we see suggestions of rental growth in this segment due to a shortage of quality office space and a potential increase in office employment. .”
Richard Harrison, head of mortgages at Atom Bank, commented: “Residential construction is clearly a key focus of the new government, and that is welcome. Layers of complexity within the UK planning system mean that as a nation we have not built enough houses to meet demand for decades. That housing shortage has directly contributed to the significant increase in house prices that has made home ownership such a difficult prospect for many first-time buyers.”
He added: “Lenders will need to embrace new build buyers and take a more flexible approach, especially around maximum LTVs, while I would also like to see more support for those with only small deposits.
“The rate at which house prices are rising, increases in rental costs and the axing of schemes such as Help to Buy have made it harder for would-be homeowners, but first-time buyers should be able to access the housing ladder. While the government must deliver on its promise to build, the onus is also on lenders to be innovative in how we deliver the support they need.
“Cost of living challenges in recent years have seen more borrowers now fall into the prime credit category after experiencing a minor credit crunch. An analysis by the FCA last year found that around six million Britons had missed a payment, but if these problems were temporary they could now be looking for mortgage finance. Given the number of potential borrowers involved, as an industry we need to see more lenders not only supporting these customers with their needs today, but also helping them regain their top status if they show improvement.”