While the turbulence evident across interest rates throughout 2023 has eased, debt and the cost of borrowing continues to be at peak levels — with a third of property developers, landlords and investors citing inflation (30%) and high interest/mortgage rates (27%) as the biggest challenge to plans this year.

However, there are clear signs the commercial property market is adjusting to this high interest rate environment.

According to Together’s new report, a major part of this adjustment is via the bullish appetite of commercial developers, investors, and landlords either exiting or diversifying portfolios to mitigate falling yields and revenues. 

52% of commercial landlords, investors and developers surveyed feel specialist lenders are best equipped to deal with their lending needs.

This comes as over two thirds (69%) of respondents anticipate the amount they must borrow to support their investment strategy will rise in the next 12 months. 

Among all respondents, almost a quarter (23%) said student housing offered the most appealing property investment opportunity over the next 12 months.

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This was followed by housing developments (21%) and luxury residential properties at 19%. 

While 29% of property investors surveyed are aware falling property values may make securing lending difficult this year — it’s not preventing the majority from capitalising on emerging growth sectors.

Nearly one in five (18%) of property investors surveyed are most excited to pursue retail projects this year, followed by housing developments (17%) and student accommodation at 16%.

For all respondents, office space (17%), hotels (15%) and industrial or manufacturing sites (13%) trigger the most hesitancy when considering potential commercial market opportunities this year.

Demand is apparent with 23% of all respondents feeling the commercial market is only improving and there are far more opportunities, 18% saying the opportunity to generate more money is high and 16% that purchase prices have reduced allowing them to snap up deals and new opportunities.

Chris Baguley, group channel development director at Together, commented: “As we look at the UK commercial property landscape, the scope and diversity of the opportunities is impressive. 

“Whether it’s student housing, residential development or repurposing retail and other larger sites, the next few years are going to provide significant growth for the UK commercial property market.

“The optimism of the sector, combined with the economic recovery, mean those investors that are well poised with the right finance support will ultimately be in the best position to capitalise on these opportunities.”