Business owners are buying their premises instead of renting, driving a surge in commercial mortgage demand
Business owners across the UK are increasingly choosing to buy their own commercial premises rather than continue paying rent, driving a rise in owner-occupier enquiries that brokers should be positioning themselves to handle, alongside a parallel surge in refinancing as existing fixed-rate terms expire.
Amar Dhanota (pictured top), director and senior mortgage consultant at London FS, told Mortgage Introducer the shift is being driven by straightforward economics.
"From the conversations I'm having, a lot of these guys are now looking at what they're paying in rent and rates, then looking at the commercial market," she said. "They've got good established businesses, so they're saying, why would we not acquire our own premises to grow the businesses?"
She pointed to a client that purchased a commercial unit a couple of years ago for approximately £500,000–£600,000, has now outgrown the space, and is acquiring a larger property at around £3.2 million – a deal Dhanota is currently handling. The pattern, she said, reflects a broader reappraisal of property ownership among established businesses navigating an uncertain economic climate.
Refinancing and acquisitions driving demand
Dhanota said a clear pattern is emerging. Clients are coming to the end of existing rate periods, and businesses are reconsidering the economics of renting commercial space.
"You're going to see a lot of refinancing, people structuring, or they're coming up to the end of their rate period," she said. "We're actually finding now enquiries are coming in for acquisitions, but more so for people's own businesses rather than for an investment vehicle."
Established businesses are comparing what they pay in rent and business rates against the cost of ownership and deciding the numbers stack up. Brokers looking to diversify into commercial mortgage advice will find growing client appetite for exactly these owner-occupier cases.
What lenders are actually doing
Dhanota is direct about how lender behaviour has shifted. Funding lines exist, but underwriting is more selective.
"Lenders in general at the moment are cautious," she said. "They've got the funding lines but they're being a little bit more particular about who they're lending to."
One dynamic she flagged as critical for brokers to communicate is the gap between headline rates and what a client actually receives. In commercial lending, unlike the standard residential market, pricing is negotiated around the individual deal and the lender's risk assessment, meaning an initial rate indication can move significantly once underwriting begins.
"One thing we've definitely learned, which we've had from clients that have spoken to other brokers and come to us, is headline rates that a lender will tell you when you're initially looking at it is not necessarily what the client's going to end up with," Dhanota said. "When it goes through and you're speaking to the lender back and forth, they're going to look at their risk appetite."
Managing that expectation upfront, she argued, is one of the most valuable things a broker can do. The stable commercial market buoyed by owner-occupier demand makes this even more critical as inexperienced buyers enter the space.
What brokers transitioning from residential need to know
For brokers considering moving into commercial, Dhanota emphasised the importance of talking to lenders before you take on a case, not after.
"Before I even took on my first commercial case, I started talking to lenders to get an idea and I was very transparent with them," she said. "I was saying, look, this is the market I want to get into, but I'm a little bit unsure, can you share some pointers? And that's how I did it, meeting up with lenders, going out for coffees and actually not being afraid to say, I don't know too much about this, so I need your help."
She also stressed legal complexity comes as a surprise to many. "Legal is the longest part of the process," she said, adding that issues, particularly on the legal due diligence side, often surface once valuations and conveyancing get under way. "Commercial, it's a totally different ball game."
On timelines, Dhanota pushed back against the assumption commercial deals necessarily drag. A current case restarted in April and received its mortgage offer in July – a two-to-three-month turnaround she attributed to front-end due diligence. "We try and do our due diligence at the front end to try and reduce down the process at the other end."
Why what tops commercial brokers' wish list matters right now
Despite caution in lender behaviour, Dhanota's overall reading of the market is positive. Lenders are looking to deploy capital, and deals do not always need to be large ticket to attract interest.
She recalled assuming a smaller deal would not appeal to a particular lender. "I had a deal which wasn't a huge deal, but I said they're not going to do that. And actually, when I had the conversation, they said, yeah, it's a good deal, it's low risk, we'll do it."
That selectivity is where experienced brokers earn their value, knowing what tops commercial brokers' wish lists and which lenders are genuinely active in which spaces.
"Lenders at the moment, it's definitely a market that is still going well," Dhanota said. "But it is really that refinancing, that's a big part of the market now."
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