"Clients may be doing these deals already but unaware you can help. Or have never considered it but may be keen to learn more about other clients’ successful development deals and exits."
The potential for commercial bridging deals continues to rise as more brokers help clients understand the potential uses of this type of short-term finance.
Bridging lending, with its flexibility and capacity to plug short-term development funding gaps, is seeing unprecedented growth. According to the latest Bridging and Development Lenders Association (BDLA) figures, reported loan book values surpassed £10bn for the first time. Demonstrating a burst of growth, in Q4 2024, bridging completions rose to £2.3bn, up 28.6% on the previous quarter.
Global real estate firm, CBRE, also said it sees embryonic signs of the UK commercial real estate market strengthening this year and predicts an investment pick-up of around 15% driven by lower interest rates and falling debt costs.
Capitalising on rising confidence
We’ve seen commercial and semi-commercial activity and confidence levels rising for some time. Plenty of landlords are rethinking previously residential-only portfolios to maximise returns, diversifying for risk and trimming costs where they can.
The UK’s less favourable tax regime for residential property investors and a highly changeable mortgage rate environment have changed the face of the buy-to-let market.
Previously, a long-standing passively-managed residential rental portfolio was standard investment practice. Now, pressure on returns is seeing many more investors buying with cash, utilising tax-efficient Special Purpose Vehicles (SPVs) and/or targeting higher yield properties, like Houses of Multiple Occupation (HMO).
As a result, brokers may already be seeing more appetite from landlords for semi-commercial and commercial development deals looking for higher yields and returns after higher mortgage rates challenged their previous investment model.
There’s also the opportunity to proactively assess your client bank and in the course of business conversation make a point of asking clients if they’ve ever considered commercial property. This could lead in any number of directions. Clients may be doing these deals already but unaware you can help. Or have never considered it but may be keen to learn more about other clients’ successful development deals and exits.
Education, education, education
If you’re a broker with little experience on the commercial side, commit yourself to the task of learning from the experts and establishing deeper sector knowledge.
Consider a professional qualification like The London Institute of Banking and Finance’s (LIBF) Level 3 Certified Practitioner in Specialist Property finance exam. Developed in partnership with trade bodies the BDLA and FIBA, it could be a helpful 12-month online deep-dive into the development and specialist lending sector.
Specialist lenders also often have broker toolkits offering tactics and specialist knowledge designed to help you manage commercial deals. Lean into lender expertise and establish relationships so you feel able to pick up the phone to trusted contacts to get advice on how to structure and work a case from those trained to understand the lending risks. Some are also often happy to take on referrals and deal with the client in order to help to manage the deal through.
Plenty of distributors and packagers also offer specialist seminars on elements of specialist finance so get on as many comms lists as you can. It’s also important to establish a wide professional network linking up with accountants, solicitors, auction houses and so on, both for the referral relationships as well as the expert knowledge they offer when a case needs it.
And it’s an obvious route, but establish a close working relationship with as many lender BDMs as you can who are a quick route to understanding the costs and lender appetite for any deal.
A mentoring relationship
At ASG, for example, we are a willing mentor for brokers with clients keen to do more in the semi-commercial or commercial space. With lending and revolving credit facilities available from £500k to £7m, we offer up to 70% LTV lending against the open market vacant possession value.
Working with brokers as a trusted business partner, we can support them in securing their time to shine when it comes to helping clients expand and diversify. As a lender, we can also offer plenty of counsel and a market view on potential opportunities for those clients. Our cases have spanned everything from leisure parks to assisted living facilities and commercial to residential conversions, which gives us a strong sense of deals that are viable in this market.
We’re willing to discuss the deal potential on any commercial property type. But the question is, as a broker in a market with a fast-growing appetite for this sector, how quickly can you put yourself in a position to do the same?
