Almas Uddin
Founder and Mortgage Advisor
29 Dec 2022
Year on year, the commercial property market in the UK has performed exceptionally well, with investment levels growing 40% from 2020 to 2021.
In 2021 business property investment values reached just less than £50 billion, including £21.2 billion invested in London alone.
Much of this surge in activity relates to the lifting of pandemic restrictions and an appetite to get back to business.
With a 40% rise in commercial property investments, equivalent to £4.162 billion average a month, the trend may have reached a peak.
The 2022 Commercial Property Investment Market
During the first seven months of 2022, investments reached £22.2 billion, making a monthly average of £3.172 billion - somewhat below the 2021 figures.
If investments retain this pace, the totals invested in commercial property will reach around £38.1 billion by December.
Although those metrics outperform 2020 investments of £35.7 billion, the outcome is that this year commercial property investment has declined by 24% when compared to the boom in 2021.
Why Are Commercial Property Investments Falling?
Much of the issue is related to excess properties available on the commercial market. Between 2019 and 2020, availability dropped 26%, and as higher demand caused prices to rise 6% on the average commercial plot, an environment of competition arose.
This trajectory carried into the 2020-2021 trading year, with commercial property stocks dropping another 14% and listing prices rising by a significant 34%.
2022 has been somewhat different, with availability improving by 7%. Average commercial property listings have correspondingly dropped in price by 17%.
Future Forecasts for the Business Property Investment Market
The outcomes of the pandemic have differed between the residential and commercial property sectors, not least because particular industries such as retail and office spaces have been considerably affected.
While the commercial property market reported high investment volumes in 2021, much of this related to investors looking to renovate older working spaces to provide quality accommodation for businesses reopening post-pandemic.
Market trading has been stable in 2022, and there isn't any indication that activities will fall, but the reality is that investments are beneath those in the previous year.
However, this is a typical trend after periods of exceptionally strong investment and when overstock availability returns to normal.
Investment opportunities remain attractive for commercial property investors, who may find that lower pricing and greater availability make it an easier, more profitable time to buy.
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