Banking crisis

Higher interest rates and cuts in lending pile pressure on commercial property sector after hit from hybrid working.

As a result, financial markets forecast that the Bank of England’s cycle of base rate rises is near its peak – which would help dampen fears for the UK commercial property market. The property group Savills, which reported a drop in annual profits this month, expects the sector to bounce back next year amid a lack of office development supply and a move towards sustainable buildings. Goonetilleke says the outlook for the UK commercial property market, like other business sectors, is closely linked to rising interest rates prompted by runaway inflation. The banking system in Britain is very different to the US, where a large share of property loans are advanced by small regional banks. As a result, property values declined by 13% for the year. A week earlier, the European Central Bank raised its deposit rate by half a percentage point to 3%.