Landlords are looking to pay down debt as they focus on optimising their portfolios in the face of challenging economic conditions. This is the conclusion from research conducted on behalf of Handelsbanken.
The survey reveals that 91% of landlords are looking to pay down the debt on their portfolios in response to rising interest rates with a focus on ensuring they are truly optimised in terms of yield and risk/return profiles.
Other statistics from the survey – 66% disposing of assets say they are bearish about the market; 24% say they cannot afford to upgrade portfolios to comply with new sustainability regulations and 58% are planning to increase exposure to commercial offices.
This year’s Professional Landlords Survey was based on nationwide research among 200 large UK investors with an average of 29 properties worth around d £14mn each.
Despite the bearish stance of many landlords, many investors will likely be waiting for opportunities to buy at reduced cost with a view to longer term value creation, re-purposing assets or capitalising early on shifts in working patterns back towards more office usage.
The research shows that despite evident headwinds there is still strong confidence in UK property as an asset class.
Handelsbanken chief credit officer Simon Bradley comments: “While our Professional Landlords Survey shows how they are positively managing the current challenges within their sector, it also reveals a clear ambition for future investment, by taking advantage of forecast market movements and adding value through active management.
“In our experience of the market, investors will require significant investment to meet current tenant demands for greater amenities to achieve meaningful returns.”
Handelsbanken UK chief economist James Sproule stresses that in contrast to owner-occupiers, professional landlords will often have a more detached and less emotional view of property values and are more likely to act in a way that recognises market realities.
“That’s why we are seeing landlords sensibly paying down debt, while others are increasingly alert to opportunities in sectors such as offices,” he says.
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