2022
9
UK Commercial Mortgages Market Report 2022
2022-11-19T03:05:43+00:00
OX1103523
1495
157686
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Report
en_GB
”2021 provided favourable economic conditions for the commercial mortgages market. As investment was deliberately postponed over the peak of the pandemic in 2020, investors took advantage of low interest rates,…

UK Commercial Mortgages Market Report 2022

£ 1,495 (Excl.Tax)

Description

The UK Commercial Mortgages Market Report 2022 identifies consumers’ attitudes towards commercial mortgages UK, the impact of inflation and the cost-of-living crisis on lenders’ behaviours and the UK commercial mortgage market in general. This report covers the UK commercial mortgages market size, market forecast, market segmentation and industry trends for the UK commercial mortgages market.

Current Market Landscape

Our UK Commercial Property Lending report shows that after a year into the living with COVID, the UK commercial mortgage market is on a collision course towards a downturn. Prevailing investor cautiousness has loosened significantly in 2021 and into H1 2022. Investment was refinanced for 2021 and shaped two years’ worth of annual investment. The initial reopening of the UK economy within optimum conditions of low interest rates, low inflation and low corporation tax created a surge of acquisition, creating a new-found appetite from borrowers for ‘Environmental, Social and Governance’ (ESG) structured loans which have been duly offered by lenders as a means of mitigating their own risk.

However, this has been followed by economic crisis and inflation. An overall emerging trend in commercial mortgages UK and within property demand has been investor appetite for the retrofitting of vacant office and retail lots into Buy-to-Rent (BTR) schemes. The alternative lender segment, in particular pensions funds following strategies of Liability-Driven-Investment (LDI), has found this profitable as it provides a diversified stream of income. BTR has offered increased profitability over 2022, as rising interest rates are making it harder for first-time buyers to get onto the property ladder – therefore leading these would-be buyers into a prolonged stay within the private rental market.

UK Mortgages Market Share and Key Industry Trends

Commercial Mortgages UK have been hit hard by extreme inflation, and in response, interest rates are raised to levels which deter large scale investment into UK commercial property. The price of both prime and secondary loans has increased across all three commercial property categories. These UK Mortgage Market forecasts are set to continue as economic conditions in the UK worsen for both investor and lending confidence, due to 40-year high inflation rates and expectations that interest rates will continue to rise.

Large lenders maintain a highly cautious approach by raising loan margins and strictly issuing credit as part of a strategy of increased fiscal insulation from growing defaulting loans.

  • 76% of newly-invested capital in 2021 was due to industrial demand.
  • 57% of 40 major UK lenders were actively looking at an ESG lending strategy.
  • 52% of new loans in 2021 were refinanced and restructured loans carried over from 2020.

UK Mortgage Market Forecasts and Future Trends

As the UK energy market witnesses an increased level of stabilisation and inflation decreases drastically, interest rates also begin to fall witnessing a return to normalcy for investors and lenders alike. However, according to our UK Commercial Property Lending report, lenders will still remain cautious as credit allocation is increasingly strategised in anticipation for a contingency such as another spike in inflation.

These factors are expected to lead to a cooling-down in demand in the UK Commercial Mortgages market that will then see market value decline in 2023 and 2024 as investors look to postpone investment and wait for a time of less volatile economic conditions.

Read on to discover more details or take a look at all of our Mortgages Market Research.

Quickly Understand

  • The growth, value, segmentation and forecast of the UK commercial mortgage market.
  • Trends in the UK commercial mortgage market’s development.
  • Growth drivers in commercial mortgages UK.
  • UK Mortgage Market Forecasts: Analysis of the industry, employment and financial structure.
  • UK Mortgage Market Share: Profiles of key companies in the market and their recent activity.

Covered in this Report

Products: Commercial property (mortgages): retail, offices, industrial premises (warehouses, factories), other commercial properties used for business purposes (cinemas, fitness clubs, gyms, leisure parks), hotels, petrol stations, and more.

Brands: Aldermore Bank, Barclays, HSBC Bank, Lloyds Banking Group, NatWest Group PLC.

Expert Analysis from a Specialist in the Field

This report, written by Jack Maskell, a leading analyst in the B2B sector, delivers in-depth commentary and analysis to highlight current trends in the UK Commercial Mortgages Market, and adds expert context to the numbers.

2021 provided favourable economic conditions for the commercial mortgages market. As investment was deliberately postponed over the peak of the pandemic in 2020, investors took advantage of low interest rates, low unemployment, a spike in consumer real wage growth and most importantly of all the re-opening of the UK economy to acquire property and refinance previous loans. However, macroeconomic conditions are now signalling a downturn for the market as high inflation and interest rates as well as the planned corporation tax rise look set to affect commercial property investment levels going forward.

Jack Maskell
Jack Maskell
B2B Analyst

Table of Contents

  1. Overview

    • Key issues covered in this Report
    • Market context
    • Covered in this Report
  2. Executive Summary

    • The five-year outlook for the commercial mortgage market
      • Figure 1: Five-year outlook for commercial mortgages, 2022-27
    • The market
    • Market size
      • Figure 2: Gross value of loan originations, 2018-22, (£ billion)
      • Figure 3: Aggregated value of outstanding debt on loan books secured on UK commercial property, 2018-22 (£ billion)
    • Market segmentation
    • Forecast
      • Figure 4: forecast of gross value of loan originations, 2017-27, (£ billion)
    • Market trends and drivers
    • Industry structure
  3. Issues and Insights

    • ESG factors represent a lucrative dual-risk strategy for lenders but ‘greenwashing’ criticism remains
  4. Market Size

    • The restart of the UK economy leads to a surge in demand but recent market turbulence derails momentum
      • Figure 5: Gross value of loan originations, 2018-22, (£ billion)
    • Demand for industrial, retail and office commercial property rose in 2021 as the post-pandemic demand pushed the economy into recovery
      • Figure 6: Demand for UK commercial property Q4 2020-Q1 2022, (%)
    • Availability of industrial commercial real estate and high rents remain a concern
      • Figure 7: Demand and availability of industrial commercial property, Q1 2021-Q2 2022, (% change)
    • Non-bank lenders’ debt share rises by 24%
      • Figure 8: Aggregated value of outstanding debt on loan books secured on UK commercial property, 2018-22 (£ billion)
  5. Market Segmentation

    • Price of prime and secondary loans increase by 0.24% in 2021
    • Intensification of lender caution has occurred in 2022 as the sector hardens in the wake of rampant inflation
    • Industrial demand still remains a strong anchor for commercial property
      • Figure 9: Average annual demand for UK commercial property, 2019-21, (annual change)
  6. Market Forecast

    • The five-year outlook for commercial mortgages
      • Figure 10: Five-year outlook for commercial mortgages, 2022-27
    • The market faces an uncertain future amidst a continued energy and currency crisis
      • Figure 11: Forecasted gross value of loan originations, 2023-27, (£ billion)
    • Demand for industrial space will remain at a crucial juncture over the foreseeable future
    • Office space demand faces the looming challenge of office ‘depersonalisation’ culture
    • Retail commercial property demand faces uncertainty but reconfiguration into ‘Meta-space’ could provide hope
    • ‘Meta-spaces’ could be the future of retail property
  7. Market Trends

    • Conversion of property through Buy-to-Rent schemes provides a safe return as the housing crisis and interest rates deter first-time buyers
      • Figure 12: Number of dwellings completed annually, by tenure, 2007/08 to 2020-21, (number of completed dwellings)
  8. Market Drivers

    • Business confidence falls as inflation and interest rates rise
    • Facilitating the ecommerce boom provides demand for investment in industrial property
    • The end of COVID-19 restrictions inspired a surge in demand for office space but recent labour shortages are weakening this rebound
      • Figure 13: Career change expectations, 2022, (% of respondents)
  9. Industry Structure

    • Changes in industry structure
      • Figure 14: Changes in the industry structure of activities related to ‘banks and building societies within the commercial mortgages market’, 2017-22, (number of businesses and outlets)
      • Figure 15: Changes in the industry structure of activities related to ‘Financial Leasing institutions within the commercial mortgages market’, 2017-22, (annual % change in number of businesses and outlets)
      • Figure 16: Changes in industry structure of activities relating to ‘Other financial leasing within the commercial mortgage market’, 2017-22 (Number of Businesses and Outlets)
    • Changes in employment structure
      • Figure 17: Changes in the employment structure of activities related to ‘banks and building societies within the commercial mortgages market’, 2021 and 2022, (number of outlets, % annual change)
      • Figure 18: Changes in the employment structure of activities related to ‘Financial Leasing institutions within the commercial mortgages market’, 2021 and 2022, (% share of all outlets)
      • Figure 19: Changes in activities relating to ‘other credit granting institutions within the commercial mortgage market’, 2021 and 2022, (% share of all outlets)
    • Changes in turnover structure
      • Figure 20: Changes in the turnover structure of activities related to ‘banks and building societies within the commercial mortgages market’, 2021 and 2022, (number of businesses, % annual change)
      • Figure 21: Changes in the turnover structure of activities related to ‘financial leasing institutions within the commercial mortgage market’, 2021 and 2022, (number of businesses, % annual change)
      • Figure 22: Changes in the turnover structure of activities related to ‘other credit institutions within the commercial mortgage market’, 2021 and 2022, (number of businesses, % annual change)
  10. Company Profiles

    • Aldermore Bank
    • Recent company activity
    • Financial activity
      • Figure 23: Financial analysis of Aldermore Bank, 2016-21, (£ and %)
    • Barclays
    • Recent company activity
    • Financial activity
      • Figure 24: Financial analysis of Barclays PLC, 2017-21, (£ million and %)
    • HSBC Bank
    • Recent company activity
    • Financial activity
      • Figure 25: Financial analysis of HSBC Bank PLC, 2017-21, (£ million and %)
    • Lloyds Banking Group
    • Recent company activity
    • Financial activity
      • Figure 26: Financial analysis of Lloyds Banking Group PLC, 2017-21, (£ million and %)
    • NatWest Group PLC
    • Recent company activity
    • Financial activity
      • Figure 27: Financial analysis of NatWest Group PLC, 2017-21, (£ million and %)
  11. Appendix – Data Sources, Abbreviations and Supporting Information

    • Abbreviations
    • Methodology
    • Market forecast and prediction intervals
      • Figure 28: The UK market for commercial Mortgages, 2022-27, (£ billion)
    • Market drivers and assumptions
    • Forecast methodology
  12. Further Sources and Contacts

    • Trade associations
    • Trade magazines
    • Trade events

About the report

This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.

Market

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Consumer

Mintel’s proprietary consumer research provides our analysts with the attitudinal and behavioral data used to provide valuable insight to topical issues.

Brand/Company

Mintel provides overviews of the top brands and manufacturers, and uses consumer research to explore attitudes and reactions to brands, as well as insight into what will resonate with consumers.

Data

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*databooks not available with UK B2B Industry reports.

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