The commercial property market faces another threat in the form of looming increases in interest rates.

HSBC has predicted that the Bank of England will start increasing interest rates as early as next year where it had previously been thought that this won’t happen until 2024.  The main reason for this is soaring inflation.  Interest rates rising will be bad for borrowers and will dampen the economy, possibly leading to a recession.

What does this mean for commercial property?  In a nutshell, disaster!  Commercial property owners will be paying more interest to their banks on their loans which in a large percentage of cases will be unaffordable, especially since many commercial properties are vacant and those which are occupied are generating lower rents now than before the pandemic.  Additionally, banks will be asking commercial property owners for up-to-date valuations which will see values plummet.  This will lead to many having to sell but few looking to buy which will result in falling prices.

If you own a commercial property, and are thinking of selling, now may be a good time before interest rates rise, property values fall and panic amongst buyers and sellers sets in.