At the Finance Professional Show in London, the commercial mortgages panel were in broad agreement that semi-commercial and mixed-use properties, in their various guises, were the boom area in commercial mortgages.
The panel, which was moderated by Nicola Firth, CEO at Knowledge Bank, went on to say that a flexible approach to lending was key to helping the market grow.
Following an audience poll in which half of all respondents suggested that mixed-use properties would be the sector with the most growth in commercial mortgage inquiries in the next year, Stephen Spinks, head of sales for commercial mortgages for the South and central at Allica Bank said: “In London and the South East, a lot of large sites are being acquired. They don’t need all the space so they’re subletting it for mixed use.”
Tanya Elmaz director of intermediary sales at Together, added: “Lots of BTL investors are dipping their toes into semi-commercial, and with mixed use some investors are getting ‘the best of both worlds’, some residential and some commercial coverage.”
It’s arguably an ideal time for investors to diversify out of BTL into semi-commercial use this year, with as competitive a market as there has ever been.
Adrian Moloney, group intermediary director at OSB Group concurred: “Semi-commercial is one of the most buoyant sectors we’ve seen this year. 50% of our clients are self-employed, so there are commercial clients already there to access.”
While the 1.2% rise in employer national insurance from the recent Budget has hit many small businesses with increased costs, it could lead to a growth in owner-occupied mortgages for smaller employers that it’s less likely to affect, due to them being able to offset the increase in employment allowance against NICs.
Whether or not mixed-use businesses would fall under the right criteria for lending can depend largely on the sector they are in, the depth and sources of income and projected income.
Mike Davies, head of lending at YBS Commercial Mortgages suggested that the ‘typical high street’ of yore is fast becoming “less shabby”, with mixed-use developments such as gyms and smart cafes among quality developments.
It can of course be difficult for first-time businesses to establish the necessary evidence for lenders to provide them with the equity they need.
“We lend to start-ups and first-time buyers, but it has to make sense,” Tanya said. “We have to see some kind of track record.”
The client needs to have relevant experience, such as having owned their own company, or plentiful experience in that sector: eg: someone who has worked in a restaurant for ten years and is now taking one over.
