It has been another quarter dominated by Covid 19. A quarter still characterized by a severe lack of supply in industrial buildings and land now too. There is continued capacity in the retail and lesser grade office sectors. Level 3 lockdown does also tend to result in a dramatic drop off in leasing inquiry but has certainly not slowed down the demand for owner occupiers or investors at this point.
Once again there are great prices being achieved for our vendors, as evidenced in our recent activity. The quarter has also been characterized by shortages of products and building materials, increasing costs of the same and the cost of labour. This has a positive effect of value preservation and ultimately inflation is good for existing owners with upward pressure on rental rates. That does need to be tempered somewhat as we keep one eye on interest rates.
The interest rate environment is certainly changing rapidly. Although the OCR has only increased 25 basis points to date, Thursday’s announcement is expected to result in a further rise. Banks have been very quick to move all their lending rates and over the past few months the 2-year fi xed rate for residential mortgages has increased from circa 2.6% to circa 4.1% (an increase in funding costs of around 57%). Commercial lending rates are also following suit, albeit far less publicised.The impact of rising interest rates is yet to manifest itself in property capital values. Logic would dictate if we had a prolonged period of rising interest rates this can’t help but adversely affect values as purchasers rate of return expectations rise. The cost and availability of funds could also neutralise the recent trend for owner occupiers encouraging people to revisit leasing again.
It is however still a great time to transact real estate so if we can assist with your needs, please reach out to your preferred Lodge Commercial salesperson.
The team would like to take this time to thank you for your ongoing support in 2021 and wish you and your families a safe and enjoyable festive season. Our offi ce will be closed from December 23rd until the 10th of January, but your preferred Lodge Commercial salesperson is only a phone call away. If you need anything during this period, please don’t hesitate to call.
Lodge Commercial agents