Bridging and Commercial Lending Markets – Upcoming Trends

What are the upcoming trends in the Bridging and Commercial lending markets?  Over the past 12 to 18 months, the macro-economic climate has posed challenges, marked by falling house prices, fluctuating inflation, and rising Bank of England interest rates. While we have seen some improvements in 2024, it remains uncertain whether this recovery is sustainable.

The future of the commercial lending market is difficult to forecast, but through analysis and recent performance reviews, we can identify potential growth areas. At Alternative Bridging, we’ve observed several emerging trends in commercial and bridging lending this year:

Commercial Bridging Loans:

Commercial lending in the form of bridging loans has become increasingly popular among landlords and investors searching for assets that outperform traditional residential properties. These loans are versatile, enabling the purchase or refinancing of commercial properties, funding improvements, or unlocking working capital. Our offerings range from £200,000 to £3,500,000 and can be secured against various types of properties, including office buildings, industrial premises, hotels, residential investments and even residential land that has planning permission.

Commercial to Residential Conversions:

Following the relaxation of the General Permitted Development Order (GPDO) on 5 March 2024, there has been an increase in converting commercial properties to residential uses. The new rules under ‘Class MA’ allow conversions from commercial (Class E) to residential (Class C3) without many of the previous restrictions, enhancing development opportunities and speeding up the process.

The 1,500 sqm maximum floorspace limit and the three-month vacancy requirement have been removed; they were often cited as major causes for delays in the development process. In addition, under Permitted Development, offices can be now converted to a greater variety of alternative uses, without having to go through a full planning application to the local authority.

Our commercial bridging loans are increasingly being used to fund conversions as investors look to make the most of the positive changes.

Capital Injection for Business Purposes:

Our revolving credit facility, the Alternative Overdraft, sees consistent demand. This flexible financial solution allows clients to access funds repeatedly without a new application each time. Unlike term loans that provide a lump sum of money upfront, a revolving credit facility allows developers to draw funds as needed, repay, and draw again.

It’s particularly beneficial in managing project costs and dealing with inflationary pressures, providing capital at project commencement and supporting business expansion without the need for new loans.

Refurbishment Loans:

There’s a steady demand for refurbishment loans, categorised into ‘light’ and ‘heavy’ refurbishments. Light refurbishment bridging loans, which are short-term and interest-only, cover non-structural improvements like painting, flooring, and room updates. Conversely, heavy refurbishment loans cater to more extensive renovations that require structural changes and planning permissions, such as adding extensions or converting properties.

Regulated Short-term Lending:

Regulated bridging loans continue to solve issues like chain breaks in property transactions, offering flexibility and competitive advantages. Many brokers and buyers have been able to rescue deals from the edge of disaster, and actually put the buyer at an advantage.

For example, a regulated bridging loan can facilitate a move before a client has sold their existing home, so there are no hurdles in their way. It also means buyers can be in a stronger position than their rival buyers, and also be on the same level as cash buyers, even making it sometimes possible to get money off the asking price.

This is only possible because of the rapid decision-making processes that bridging lenders employ; it means applications can be turned around quickly, with funds often released within a week.

As we continue to navigate the uncertain economic landscape, staying informed about these trends in bridging and commercial lending will be crucial for investors and developers looking to capitalise on the evolving market opportunities.