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Lenders cautious over retail property

Posted: May 12, 2018

Many lenders are cautious about providing commercial mortgages for retail property purchases.

The Office for National Statistics has reported that retail sales for the first quarter of 2018 fell by 0.5%. High profile retail chain collapses, such as those of Maplin and Toys R Us, have underlined the uncertainty in the retail sector. Not all sectors are declining however, with some department stores reporting strong sales and online retail continuing to grow.

Small towns and villages without major retail parks will continue to need small shops and this could provide property investment opportunities. Some investors have been buying off-plan units, which developers offer at discount prices to help fund construction work. These units can then be sold at a profit when built.

Many retail companies are adapting to the changing habits of consumers and this has resulted in high growth. Some combine a physical store with their retail store by offering click and collect purchases.

Lenders are still willing, but cautious, in offering commercial mortgages for retail premises. Lenders will look carefully into each mortgage application and only provide funds if the investor can make a good case for the profitability of the investment.

Bridging finance can be a source of funds for investors to release capital tied up in retails properties they own.

If, in the future, large mainstream lenders stop lending for retail property, this could provide an opportunity for small alternate lenders to provide funds. Mortgage brokers can advise borrowers on the best commercial mortgage deals for retail premises.