(July, 2022) Commercial mortgage brokers are expecting a sharp increase in commercial property sales, with 42% expecting to see more SMEs look to acquire their premises rather than rent.

Rising business costs, including rent and associated charges, are driving business owners to buy their properties and acquire a freehold asset, rather than navigate a fluctuating rental market and uncertainty of tenure.

The data comes from a new survey by Allica Bank, which polled 161 of its commercial mortgage broker partners. It revealed that many businesses were also taking action to protect against future interest rate rises, with more than half of brokers (55%) saying there is demand among their client-base for 10-year fixed rate mortgages, while five-year fixed terms were in significantly higher demand than two and three-year terms

The report highlights, too, that only 3.5% of brokers expect the number of businesses buying property to decline, while a notable portion (21%) are still unsure as to what the future holds.

Allica’s data also revealed that businesses may be looking to manage rising costs by focusing on sustainability. 65% of brokers said they’d noticed more SMEs are looking to raise capital for this reason, with nearly a quarter (23%) noticing a large increase. Of those business looking to go green, nearly half of brokers (47.7%) said they had clients hoping to do so by upgrading machinery, while another 35% said their clients are using external financing to improve the sustainability of their existing premises.

On top of those looking to make changes to existing properties, almost a fifth (19%) of brokers said clients are using commercial mortgage products to relocate altogether and move to more sustainable properties.

Allica’s Chief Commercial Officer Nick Baker said it’s encouraging to see businesses take action to respond to the more challenging conditions: “Rising interest rates and energy prices are a concern for every business owner. By taking actions such as purchasing a property, reviewing fixed-rate mortgage options, or improving energy efficiency, business can look to soften the blow, or at least have more certainty about their future business costs.

“It shows once again how vital the support of a broker can be in helping businesses find the right products to achieve these goals.

“Allica is doing all it can, too, to give brokers the tools they need to support those clients. We recently launched our first fixed-rate mortgages, introduced a rate discount for properties with strong EPC ratings, and reduced our rates across the board for prime mortgages. Once again, the insight and support of our broker community has been vital in enabling us to respond to what the market needs and I’d like to thank them for that feedback.”