Investors double down on commercial property purchases as borrowing costs fall

The commercial property market is seeing a significant revival as investors capitalise on falling borrowing costs and the strong performance of key sectors like heavy industry, according to new data from Shawbrook.

The lender’s latest insights reveal a 102% year-on-year increase in commercial property lending between 2023 and 2024.

Regional hotspots and diversification

The South East has emerged as a key destination, accounting for 30% of total commercial purchase lending. Investors are drawn to the region’s excellent transport links, robust economic growth, and sustained demand for commercial spaces.

Shawbrook’s data also highlights a shift in investor focus, with semi-commercial property applications—such as mixed-use retail and residential units—rising from 13% in 2023 to 24% in 2024.

This trend signals a move towards high-yield asset classes that offer both income potential and portfolio diversification.

Resilience in uncertain markets

Daryl Norkett, director of real estate proposition at Shawbrook, notes that the commercial market is rebounding strongly after a period of turbulence:

“Investors are keen to expand and diversify their portfolios with high-yield, high-income properties like commercial, semi-commercial, and HMOs. These assets not only offer potentially higher returns, but diversification can also help to build resilient portfolios even in uncertain markets.”

Norkett advises investors to approach commercial property with caution:

“Risk profiles vary significantly across regions and asset types. Conducting thorough research and working with a specialist commercial broker can provide invaluable guidance on the best opportunities available.”

Growing appeal of commercial property

The rise in commercial property investments coincides with broader market trends, including a resurgence in demand for industrial and logistics spaces, driven by the growth of e-commerce and infrastructure developments.

With borrowing costs continuing to decline and investors increasingly eyeing high-yield opportunities, the commercial sector is positioned for sustained growth in 2024 and beyond.