It’s great to be back writing for PIN for this edition, and I thought I would share with you my thoughts on the commercial property market, and the opportunities I can see presenting themselves over the next couple of years – which truly could be the ‘buying opportunity of a decade’.

We are now slowly getting used to a market with high energy prices, high inflation, high interest rates and stalled economic growth. Markets, particularly the commercial property market, are fuelled by sentiment and, as the cost of debt continues to rise and commercial banks contract their lending, sentiment in the commercial market continues to worsen.

The commercial property sector is now operating within the context of a second economic contraction in three years, a rapid rise in the cost of commercial debt and high inflation, exacerbated by the ongoing long-term structural shifts in tenant demand precipitated by the pandemic – with retail and offices being the hardest hit.

Activity in the commercial market is slow, particularly at the upper end of the market. Economic uncertainty, together with current pricing and expensive debt, has raised the risk profile of many investors, and commercial property yields are now moving upwards. Properties priced sub £1m, particularly where there are permitted development conversion opportunities, seem to be holding up as investors can buy cash. However, I would caution that some of the pricing at that end of the market seems to be high. In all echelons of the market, there is still a gap between the expectations of purchasers (for lower pricing and higher yields), and those of sellers who are not yet willing to take a discount on price. Properties on the market are starting to come down in value and vendors’ (and agents’) expectations on price seem to be slowly softening.

Transactions are taking much longer as both purchasers and financiers forensically analyse risk.