Semi-commercial: dynamics, trends and demographics of emerging markets


“This remains an often complicated and complex process, a factor that underlines how important it is for advisors to forge even closer relationships with specialist lenders.”

The buy-to-hire market is an ever-changing beast. Over the years, we’ve seen so many changes in dynamics, trends, and demographics that it can be hard to keep up.

However, one of the most dramatic changes in recent years has been the decline of the “amateur” owner and the rise of the “professional” owner. The factors behind this change have been well documented. And with portfolio owners dominating the BTL buying market, it’s no wonder that areas that could have been seen as niches in the past are truly in the foreground, as a growing number of owners are looking for a greater diversity in their portfolios and continue to explore different asset classes. .

One of these areas is semi-commercial. Typically, semi-commercial mortgages are aimed at meeting the business and residential needs of an investor or borrower and are typically priced based on the unique conditions of the project. These products can be used to acquire sites, finance the development of new projects, conversions and renovations. Examples include apartments located above stores, restaurants or offices or a development consisting of residences and commercial buildings. It may also include pubs with accommodation, boarding schools and catteries with accommodation and guesthouses or guesthouses with owner’s accommodation on site.

Historically, the commercial lending market has long been the preserve of large commercial banks. However, semi-commercial is an industry where the size and scale of a variety of transactions is evident. Larger lenders tend to have business divisions that are unlikely to consider an asset size that a lender like HTB would consider. In many cases, it just wouldn’t be big enough to interest them. Then there are the residential divisions within these large lenders that do not have the capacity to value commercial assets, which means semi-commercial remains an underserved segment.

Having said that, it’s fair to say that we’ve seen increased activity from lenders operating in and around the semi-commercial space lately. From HTB’s perspective, we have experienced record lending levels across our semi-commercial businesses and we expect this trend to continue for several reasons. This is mainly due to the strong yields generated, good cash flow and the good performance of asset values.

Although challenges remain. Nowadays, it’s increasingly difficult to know exactly what a solid tenant looks like. It’s very difficult to say! Being able to fully understand how they negotiate, how they coped before the pandemic, during the pandemic and potentially after the pandemic is vital in the current economic climate. For example, take-out restaurants became the go-to asset for lending, while quality retail units in central London naturally struggled and were largely avoided by finance providers. This revelation would have been a real shock before Covid and it is something you could never have foreseen if you had stepped back 18 months. What this shows is the evolution of the market and the number of semi-commercial offerings which have changed considerably over the past year due to trade restrictions imposed on many companies.

From an intermediary point of view, lenders operating in this product space should follow a structured approach and be as transparent as possible in terms of how and where they can do business, let alone how their service levels are. ‘are currently accumulating. This remains an often complex and complex process, a factor that underlines how important it is for advisors to forge even closer relationships with specialist lenders in order to better understand loan lines, criteria, policies and scenarios. of individual loans. After all, it is the strength of these connections that will be critical in meeting the needs of the growing number of homeowners looking to make the most of the dynamics, trends and demographics of emerging markets.

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