Commercial property

Agent reports rise in commercial property valuations

08:00 4 May 2022

Brown&Co’s Robert Flint reflects on the reasons for the increase in commercial property valuations over the past 12 months.

While public attention has focused on the residential real estate market lately, the economic engine of commercial real estate has quietly receded into the background. It has never been so obvious; the last 12 months having seen a massive increase of over 50% in the number of appraisals undertaken by the Brown&Co sales team – a phenomenon experienced by a number of our fellow appraisal companies operating in the city.

Trade appraisals are undertaken for several purposes. These can be for purchase financing, refinancing, taxation, pension funds and accounting among others. We have seen an increase in the number of reviews across this range, however, one of the most notable areas has been financing purchases on behalf of banks. Typically, a commercial property is purchased for one of two reasons, by a business as an owner occupier or to be purchased as an investment to let.

With borrowing interest rates so low for such a long time, many well-funded businesses have decided against renting a property and instead have put their capital in a deposit to purchase their own business premises. This has continued to push the trading market forward due to the scarcity of available opportunities.

In addition, the commercial real estate investment market has continued to strengthen. This has been demonstrated by the huge number of requests received for opportunities that arise in the market and the subsequent compression of yields.

That being said, in today’s market, not all areas of commercial real estate are created equal. Due to the continued rise of online retail, industrial property has seen tremendous gains over the past two years, while the retail and office markets have struggled comparatively. However, with the return to the office in full swing, the office market has started to rejuvenate. This is starting to have an effect on retail and leisure properties as our ‘beautiful’ city returns to full capacity.

So what does the next 12 months have in store for us? One could argue that this 50% increase was simply due to pent-up demand during the Covid-19 shutdowns. However, while it’s still early days, the team’s initial valuation numbers show that we’re likely to be at least in line with the past year, so a busy year in store. Guess I better get back to work then…

For more information, contact Robert Flint, Commercial, Brown&Co in Norwich on 01603 629871.