Brighten anticipates a stronger commercial foothold for brokers as changing borrower priorities open fresh lending opportunities.
Brokers could originate half of commercial lending within two years, according to Brighten’s associate director and head of commercial, Ben Mckell.
The non-bank lender’s commercial head sees room for expansion as business owners consider purchasing premises and investors explore smaller commercial properties.
Mckell said discussions with lending executives and aggregators pointed towards a substantial increase in brokers’ commercial penetration.
“It’s probably around 35 per cent to be honest [current commercial broker market share], so now’s the time for a broker to capture that market share because when I speak to other heads of commercial and businesses or aggregators, we’re expecting that market share to increase to about 50 per cent in two years’ time,” he said.
Smaller assets draw attention
Mckell said commercial applications had increased following the federal budget changes, while brokers were seeking more guidance on ownership structures.
“In terms of commercial flows, there really wasn’t any negative impact because commercial property is still allowed to retain those negative gearing benefits, and to be honest, we’ve actually seen a large increase in commercial lending applications,” Mckell said.
“In terms of scenarios, there are a lot more questions from brokers on different types of trust structures, on how they can navigate through this for residential property as well, they are asking more questions about the negative gearing changes.”
Commercial brokers were also telling Mckell that some buyer’s agents previously focused on residential developer stock were turning towards micro warehouses and storage units.
That emerging interest, however, had not produced a substantial commercial SMSF application uplift, with prospective borrowers awaiting greater policy certainty.
“We haven’t seen an immediate upshoot, I think some of the investors are still waiting on all the final rulings, in terms of the SMSF going forward, because they’re probably hesitant, what if the government makes a change to commercial security within SMSF?” Mckell said.
Yet he revealed that Brighten reported a sharp, short-lived residential application response when the LRBA residential borrowing ban was announced.
“SMSF lending is definitely not dead, yes it’s slowed down because of the residential flows, but on the day the ban was announced, our application flows for residential SMSF actually quadrupled,” he said.
He interpreted the response as greater awareness of managing super through property.
Business owners explore ownership
Mckell also said that more business owners were considering buying premises, either within an SMSF or through conventional commercial finance.
He noted that one broker had described a florist paying $17,000 in rent who could purchase a nearby shop, with Mckell viewing the opportunity as a potential transition from rental expenditure towards asset ownership.
Mckell also noted that industrial property was particularly prominent in Brighten’s portfolio, with the commercial chief identifying tenant longevity and income returns as attractions for business owners and investors.
“If I look at our book, it’s very heavily concentrated in industrial assets, which seems to be the number one commercial asset for both a business owner, but also a property investor,” he said.
“Depending on the location of an industrial unit, whether it’s a factory or warehouse, they tend to have longer-term tenants with some pretty attractive yields. We’re seeing yields range from 5-8 per cent.”
Familiar clients, broader lending
Amid a softer mortgage backdrop, Mckell resisted describing residential specialisation as dangerous, and instead framed commercial expansion as an opportunity amid weaker home-loan activity.
“A broker already understands property, when you look at the financial analysis, they’re well equipped to read financials, and the serviceability is pretty similar,” he said.
“We all look for the main figures in a commercial loan, we still want to see what the net profit is, any addbacks, but we may just need to do a bit more deep dive into group servicing to look at the overall structure of the personal and business income and commitments.
“The brokers need to start having those conversations, and maybe they have self-employed clients who’s come to them for a home loan just isn’t aware that they offer commercial loans.”
Mckell said reviewing balance sheet liabilities could uncover financing needs beyond the original home loan inquiry.
Private lending gathers interest
Alongside property-backed commercial lending, Mckell reported strong demand for Brighten’s private-loan offering among asset-rich customers.
He distinguished multiple entities and trust structures from an inability to meet repayments and said investors were also contributing to demand.
“I’m seeing an increase in demand in that particular product, and specifically it is for investors as well,” Mckell said.
He added that these borrowers were increasingly seeking short-term funding to acquire sites while preparing development plans, and would likely exit when ready to construct.
[Related: CBA says residential investors yet to pivot to commercial]
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