Brexit has failed to put the brakes on the West Midlands commercial property and house building market as investors continue to seek high quality opportunities, according to commercial property consultancy Lambert Smith Hampton (LSH).
Despite some gloomy economic forecasts, investors and developers continue to transact with the support of their lenders said Eddie Kelly, director of property finance at LSH in Birmingham.
Eddie said: “It is still relatively early days in trying to assess the full impact on the local lending market since the UK decision to leave the EU. However, we are working with a number of senior bankers from High Street and challenger banks in the region and the message has been ‘business as usual’ in terms of their appetite to lend.
“Whilst the lender appetite remains we think the bigger challenge for the banks may be sourcing the opportunities they want as investors become more cautious.
“The key fundamental criteria for lenders has not materially changed since June 24 and it is only natural that whilst the uncertainty around values in the market remains lenders will increase their due diligence on transactions and particularly the asset fundamentals and track record of the sponsor and promoter.”
Whilst many people expected debt pricing to increase and appetite to reduce, LSH has not seen evidence of that in a number of commercial investment transactions it is currently advising on.
“In uncertain times there will always be a flight to quality and well structured and sensibly geared lending propositions are attracting the same pricing and debt quantum that they were pre- Brexit,” said Eddie.
“As we would expect, the more marginal propositions may face increased challenges in securing funding and if they do it is likely be at a higher price with reduced debt amounts and increased conditionality.”
LSH is currently advising on the re-finance of a Midlands portfolio comprising a blend of assets from industrial, retail and office sectors, where it needed to seek revised terms post-Brexit.
“The terms are more favorable for the client now than pre–Brexit and, whilst this was driven by the strength of the portfolio, it also reflects the flight to quality mindset of the lenders. One senior lender commented that this may be replicated on other transactions as competition to lend to these quality propositions increases,” he added.
The development finance market in Birmingham and across the West Midlands has been ‘business as usual’ – the funding market continues to be very challenging, particularly for the SME house builder.
Eddie added: “The high street lenders were generally cautious pre-Brexit in this sector anyway and a lot of the smaller SME house builders have sourced funding from the challenger banks and alternative lenders such as Aldermore, Close Brothers and Regentsmead.
“It is too early to say how pronounced and prolonged the housing slowdown will be and headlines are always focused on London and South East where we have seen evidence of funders withdrawing from the market or radically changing the terms of their lending.
“Concerns over the London market may actually assist the smaller house builder locally as we are being approached by London based alternative lenders who are now sourcing opportunities in the regions that they may not have considered 12 months ago.”