Commercial property shortage' may boost mortgage demand'

09 April 2010

Posted by Gavin Elley

Rental prices for offices and other business real estate are set to rise over the next two years, something that could increase demand for commercial property mortgages.

According to executive director and head of the central London agency at CB Richard Ellis Digby Flower, rents in the centre of the capital will continue to go up "through to 2012".

This may encourage firms to use a commercial mortgage to purchase a property outright rather than renting, or to invest in buildings that can then be let out to tenants.

Mr Flower explained the collapse of Lehman Brothers in late 2008 caused the pipeline of new developments to be "switched off" as funding dried up, meaning there will be a shortage of available space as demand increases.

And the government's empty rates charges also had an effect, he said, as they "meant that some secondary buildings that might otherwise have been left empty and then been refurbished have been knocked down".

Research from NB Real Estate published earlier this week revealed 1.2 million square metres of commercial property space disappeared from the market in the 12 months to January 1st 2009.

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