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The booming commercial property market

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The commercial property market is booming after years of under-investment.

Increased spending in the owner-occupier and rental sectors reflects a greater appetite from the banks to make funding available as well as investors who hold the necessary finance. We believe this will result in the market growing further over the coming months. 

The recent change in stamp duty rules imposing higher rates of stamp duty for those owning more than one property is expected to have an impact on investment in the private rental market although it is not clear at this stage just how significant that impact will be. However, we anticipate that investment in commercial property, where stamp duty rates have also changed, will be less affected.

Market improvement has also given commercial tenants the confidence to commit to longer term leases. Although all tenants should seek legal advice before entering into a lease tenants opting for a longer term must seek legal advice on what they are committing to before their lease is completed. From a risk perspective, they should certainly treat a longer term lease as if they were buying the property, as there can be significant financial obligations.

The increased confidence in the market has also given both commercial property owners and buyers the boost needed to increasingly turn to auctions as a way of buying or selling property quickly. There is a wide spectrum of commercial property available including plots of land for development, shops, office buildings, etc. Though properties sent to auction were, historically, perceived to have a problem this is not always the case.

It remains vital for buyers to carry out their due diligence when purchasing property at an auction: on the fall of the auctioneer’s hammer, there is a legal commitment to buy the property and you generally have to pay a 10 per cent deposit on the property. Buyers are now approaching us more often to review auction packs ahead of the bidding but need to ensure there’s sufficient time – buyers should allow a minimum of two weeks if not longer – for a solicitor to investigate the auction pack. Sellers will sometimes omit documents that would discourage a buyer, so it’s imperative that buyers and their advisors do the necessary research before a bid is made at auction.

The positive growth we’ve identified in the commercial property market and the potential we believe it offers in the remainder of 2016 is echoed by others. As noted by one property sector commentator, occupier demand across UK regions is holding up, supporting good to strong rental growth across all segments while, in the property investment market, investors remain convinced by the perceived value of UK property.