Is the Commercial Mortgage Market on the Path to Recovery?

The Current Commercial Mortgage Market

As of January 2025, the United Kingdom’s commercial property market is exhibiting signs of recovery and renewed investor confidence. Following a challenging period marked by economic uncertainties and the aftermath of the pandemic, recent analyses suggest a positive outlook for the sector.

Market Recovery and Investment Trends

According to CBRE’s UK Real Estate Market Outlook 2025, cbre.co.uk capital values in most commercial sectors are poised to rebound, with many reaching their lowest points in 2024. This anticipated recovery is underpinned by expectations of economic growth and a more favourable investment environment.

Colliers’ 2025 commercial property predictions colliers.com highlight a shift in investor focus towards value-add opportunities, sustainability, and flexible spaces. They forecast that UK commercial property returns could reach double digits, around 11%, driven by this evolving investment mindset.

Many other industry commentators such as Savills echoes overall optimism in the market, noting that the foundations for a commercial real estate recovery are in place. They anticipate greater investor confidence and highlight strength and recovery across various sectors.

Sector-Specific Developments

The push from larger corporates to encourage return to office working means that the prime office sector is experiencing notable activity. More to come here and this maybe a sector to watch with interest.

In the retail domain, there is a resurgence of institutional interest in prime shopping centres and retail parks, attributed to rising rents and increased consumer confidence.

The industrial sector is also evolving, driven by advancements in artificial intelligence, robotics, and a push for sustainability. This transformation is reshaping investment strategies, with a focus on modern facilities equipped for automation and energy efficiency.

Transaction Timescales

The transaction timescales for completion are still extremely sluggish with the duration of commercial property transactions taking several months. While transactions vary considerably due to factors such as property type, transaction complexity, and the efficiency, or not, of lenders, surveyors and solicitors, generally, the process encompasses several stages:

Mortgage Application and Acceptance: Once a borrower has had an offer accepted the application for funding can start. Depending on the lender this can take 2-3 days or if further information is required, several days.
Offer, Due Diligence and Searches: Once an offer from a lender is made, the borrower’s solicitor conducts necessary searches and due diligence, which can take approximately 3 weeks to 3 months, depending on the local authority’s workload and the solicitor.
Exchange of Contracts: Upon satisfactory completion of due diligence, contracts are exchanged.
Completion: The period between exchange and completion typically ranges from 7 to 10 days, allowing both parties to finalize arrangements.

Overall, a straightforward commercial property transaction may take between 14 to 16 weeks. However, complexities such as planning permissions, tenant arrangements, or financing issues can extend this timeframe.

Conclusion

The UK’s commercial property market in 2025 is on a path to recovery, with increased stability and investor optimism. While transaction timescales can vary, understanding the typical stages and durations involved can aid stakeholders in navigating the process more effectively.

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