Table of Contents
Overview
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- Key issues covered in this Report
- COVID-19: market context
- Economic and other assumptions
- Covered in this Report
Executive Summary
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- Impact of COVID-19 on the commercial mortgages market
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- Figure 1: Short-, medium- and long-term impact of COVID-19 on the commercial mortgages market, 24 May 2021
- The market
- Market size
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- Figure 2: Gross value of loan originations, 2017-26, (£bn)
- Market forecast
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- Figure 3: Aggregated value of outstanding debt on loan books secured on UK commercial property, 2017-26 (£bn)
- Market segmentation
- Market trends and drivers
- Companies and brands
- Industry structure
- Company profiles
Issues and Insights
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- Unleashing savings could lead to an interest rate crunch if policy makers need to quell inflation
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- Figure 4: Past and projected inflation rates, Q1 2016 – Q1 2025, (percent)
- Jump in online shoppers offers a way out for flagging retail properties
The Market – Key Takeaways
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- Originations anticipated to rise 8.5% in 2021 as restrictions are phased out
- Return of economic activity to drive originations growth, and debt reduction
- Effects of COVID-19 driving reassessment of office space and retail redevelopment
- Cautious lending will leave gaps for non-banks and work synergistically with new options opened up by PDR changes
Market Size
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- Impact of COVID-19 on the commercial mortgages market
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- Figure 5: Short-, medium-, and long-term impact of COVID-19 on the commercial mortgages market, 24 May 2021
- Methodology
- Originations begin recovery as vaccination rollout clears the outlook for 2021
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- Figure 6: Gross value of loan originations, 2017-21, (£bn)
- Consumer spending will drive confidence in the retail and office sectors as social distancing rules are relaxed
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- Figure 7: Aggregated value of outstanding debt on loan books secured on UK commercial property, 2017-21 (£ bn)
Market Segmentation
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- COVID-19 amplified structural issues in retail that will drive both divestment and redevelopment
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- Figure 8: Number of businesses entering administration and the number of stores and employees affected, 2012-21, (number)
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- Figure 9: Prime and secondary loan margins on commercial retail property, 2018-20, (basis points)
- Flexibility becomes instrumental as COVID-19 puts the traditional office model into question
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- Figure 10: Prime and secondary loan margins on commercial office property, 2018-20, (basis points)
- Shipping and warehousing demand from online shopping continues to anchor the industrial sector’s performance
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- Figure 11: Prime and secondary loan margins on commercial office property, 2018-20, (basis points)
- Proven returns and a trend towards redevelopment and mixed use is spurring interest in the alternative segment
- Care homes
Market Forecast
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- Alternative segment to grow in importance as market moves towards redevelopment and mixed-use
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- Figure 12: Consumers’ interest in activity participation post-COVID-19, 1 – 12 April 2021, (% of respondents)
- Figure 13: Forecasted gross value of loan originations, 2022-26, (£bn)
- Outstanding debt
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- Figure 14: Forecast of aggregated value of outstanding debt on loan books secured on UK commercial property, 2022-26, (£ bn)
- Retail
- Office
Market Trends
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- Affordability issues are pushing long-term investment into ‘build-to-rent’ prospect
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- Figure 15: UK new permanent dwellings completed annually by tenure, 1989/90 – 2018/19, (number of dwellings completed)
- Reformed permitted development rights to enable redevelopment for residential purposes
Market Drivers
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- Non-bank lenders are primed to fill funding gaps but loan sizes will be limited
- Funding gaps left by cautious lenders open the door for non-lenders to establish themselves
- Brexit will raise operating costs but wealth of opportunities post-COVID leaves investors undeterred
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- Figure 16: Proportion of loans originated to sector, by lender type, 2020, (% of new loans)
Companies and Brands – Key Takeaways
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- Outlet decline continues as digitisation continues in response to falling branch usage
- Growth in mid-tier categories suggests a wealth of small and mid-value opportunities in the market
- COVID-19 accelerates branch closures as losses encourage efficiency gains through digitisation
Industry Structure
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- Changes in industry structure
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- Figure 17: Changes in the industry structure of activities related to the commercial mortgages market, 2016-20, (number of businesses and outlets)
- Figure 18: Changes in the industry structure of activities related to the commercial mortgages market, 2016-20, (annual % change in number of businesses and outlets)
- Changes in employment structure
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- Figure 19: Changes in the employment structure of activities related to the commercial mortgages market, 2019 and 2020, (number of outlets, % annual change)
- Figure 20: Changes in the employment structure of activities related to the commercial mortgages market, 2019 and 2020, (% share of all outlets)
- Changes in turnover structure
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- Figure 21: Changes in the turnover structure of activities related to the commercial mortgages market, 2019 and 2020, (number of businesses, % annual change)
- Figure 22: Changes in the turnover structure of activities related to the commercial mortgages market, 2019 and 2020, (% share of all businesses)
Company Profiles
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- Aldermore Bank
- Recent company activity
- Financial activity
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- Figure 23: Financial analysis of Aldermore Bank Plc, 2015-20, (£m and %)
- Barclays
- Recent company activity
- Financial activity
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- Figure 24: Financial analysis of Barclays Plc, 2016-20, (£m and %)
- HSBC Bank
- Recent company activity
- Financial activity
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- Figure 25: Financial analysis of HSBC Bank Plc, 2015-19, (£m and %)
- Lloyds Banking Group
- Recent company activity
- Financial activity
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- Figure 26: Financial analysis of Lloyds Banking Group Plc , 2016-20, (£m and %)
- NatWest Group Plc (formerly RBS Group Plc)
- Recent company activity
- Financial activity
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- Figure 27: Financial analysis of NatWest Group Plc, 2016-20, (£m and %)
- Santander UK
- Recent company activity
- Financial activity
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- Figure 28: Financial analysis of Santander UK Plc, 2016-20, (£m and %)
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Methodology
Further Sources and Contacts
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- Trade associations
- Association of Short Term Lenders
- CoStar
- The Institute of Chartered Accountants in England and Wales
- National Association of Commercial Finance Brokers
- RICS
- Trade magazines
- Bridging & Commercial
- Business Matters
- Commercial Reporter
- Loans Insider
- Mortgage Finance Gazette
- Trade events
- Commercial Finance Roadshow 2021
- The Finance Professional Show 2021
- NACFB Commercial Finance Expo 2021
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