Only a few weeks ago the economic outlook was arguably ‘Armageddon in the making’ - would we avoid a triple dip recession, the deficit increasing, manufacturing slowing, etc, etc. Maybe it’s my own perception but the press reports of late have been far more positive, including media reports on the housing market.
As we move forward into 2013, the bridging sector continues to push forward. The emergence of new entrants continues and if anything is increasing. Many of the older guard within our sector continue to try and differentiate there offering, however the same USPs are pushed out, low rates, excellent service, in-house underwriting capacity, etc.
What we at Montello have really noticed in the last quarter, is the increase of office to residential conversion enquires that we have been seeing. There are a number of factors that have led to this type of project becoming ever more popular in recent times. Cutting the red tape around office to residential planning could make projects 30 per cent cheaper to develop according to a number of consultants.
Developers and contractors are confident the changes will help speed up development and avoid costly planning conditions such as affordable housing, community infrastructure levies and section 106 obligations.
According to one developer we recently worked with, the saving can be anywhere between zero and 30% per cent below the equivalent cost of a new build residential project.
Nowadays, and due to the implications of many offices being vacant, the commercial sector is under a lot of pressure as the demand for offices has almost dried up. There are many companies in the current economic climate that are implementing cost-saving plans, space optimisation strategies and only considering relocation if the new space offers better pricing and payment terms.
A number of developers and landlords are currently considering converting their commercial assets into residential, in order to capture the new market dynamics and demand requirements. This is a natural reaction to avoid the slow demand and high supply expected within the commercial sector.
Clearly it is not always practical to convert offices to residential, as some buildings will require significant redevelopment and the cost involved would not make economic sense, but we are seeing a lot of these sorts of opportunities and for the right deals we are very keen to lend.
Montello have always been keen to consider lending on commercial property, if the deal is something we want to do we will put together a cost effective offer quickly. We always look to recognise new opportunities in the property market and have a proven and profitable track record of acting when the demand is there.
