Chris Oatway on where commercial appetite is returning and how brokers can prepare for what's next
The UK commercial mortgage market is showing renewed momentum, with demand for industrial assets and prime office space driving a surge in enquiries, even as developers remain firmly on the back foot.
Chris Oatway (pictured top), co-chief executive of LDN Finance, told Mortgage Introducer the market's shift over the past 12 months has been less about a broad recovery and more about a fundamental recalibration of where capital is prepared to go.
"Developers remain cautious, largely due to uncertainty around build costs, construction risk and the slower residential sales market," Oatway said. "Development finance is still available for the right schemes, but borrowers and lenders are taking a much more disciplined approach to leverage, valuations and exit assumptions."
Where is commercial demand coming from?
Oatway points to two distinct forces reshaping enquiry volumes. The first is supply-chain pressure pushing businesses towards warehouse and storage capacity. The second is a polarisation of the office sector, where occupiers are consolidating their footprints but competing hard for the best space available.
"The office market is also becoming increasingly polarised," he said. "Companies may be reducing their overall footprint, but they are prepared to pay a premium per square foot for high-quality, amenity-led offices that provide a better working environment and encourage employees back to the workplace. That is creating strong occupational demand for genuinely prime space."
Mixed-use is also emerging as a route for residential investors looking beyond conventional buy-to-let. Oatway has observed growing interest in ground-floor commercial or retail units paired with houses in multiple occupation (HMO) or residential accommodation above, driven by yield differentials and the potential for value-add returns.
The underlying message, however, is that liquidity is not the issue. "Overall, the market is not lacking liquidity, it is lacking tolerance for weak fundamentals," Oatway said. "Capital is available, but lenders and investors are being far more selective about leverage, income sustainability and the credibility of the exit."
What brokers get wrong about commercial deals
For intermediaries who handle commercial cases infrequently, the sector can feel opaque. Oatway's view is that much of that complexity is overstated, and that brokers who approach commercial lending through a familiar residential lens can make it more complicated than it needs to be.
"The commercial finance market is often perceived as more complicated than it actually is," he said. "At its core, it is not dissimilar to buy-to-let lending: the lender is primarily assessing the underlying asset, its value and the income it produces."
The critical distinction, he argues, is the weight placed on the lease. Covenant strength, lease length and structure, break clauses, and rent reviews all carry significant influence over lender appetite in a way that residential underwriting simply does not replicate. Brokers who understand this dynamic – and who can present those fundamentals clearly before approaching a lender – will find the process considerably more straightforward.
"Good preparation is about understanding the asset, the income and the lease before approaching lenders," Oatway said. "If those fundamentals are clearly presented, it becomes far easier to identify the right lender, package the case properly and manage it efficiently through to completion."
The latest commercial and specialist lending market updates reflect how rapidly this part of the market is evolving for UK brokers.
What the next 12 months could bring
Oatway is expecting the commercial market to become more competitive over the coming year. A number of traditional bridging lenders have already moved into commercial lending, and he anticipates further new entrants as established players seek additional distribution channels and market share.
Pricing conditions are already shifting in borrowers' favour. Oatway notes that 75% loan-to-value is regularly achievable on commercial investment, with higher leverage available in the owner-occupier segment. A significant spread between lenders on pricing points to further room for competition and product development.
For brokers, the message is clear. Diversification into commercial lending is a strategic opportunity, not just a fallback. Intermediaries looking to build out a commercial mortgage proposition for clients will find the competitive conditions of the next 12 months a useful entry point. With some investors selling residential portfolios and developers remaining cautious about committing capital to new schemes, higher-yielding commercial assets are drawing growing attention. Broader trends shaping the UK mortgage market suggest commercial finance will play an increasingly central role in how the intermediary sector evolves.
Oatway's advice to intermediaries is straightforward: "Brokers should be positioning themselves now to understand these opportunities and, importantly, the lenders prepared to support them."
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