A Guide to Commercial Property Investment

Britain is a nation full of property investors. Many of us invest in property to give it a lick of paint, some modern features, and other favourable additions, and then either sell on for profit or let. While this seems like a great market to get into, how many people consider investing in commercial property instead?

Property has long proven to be a sustainable investment. For many, buying property to let is their career, while for others it can be a way to get extra income on top of their salary.

According to the British Property Foundation, commercial property now accounts for 13% of the value of all buildings in the UK, with the value for commercial assets set at £883 billion in 2016, representing 10% of the entire UK’s wealth.

What is Commercial Property?

When many people think of commercial property they may automatically think of a retail property. However, a property commercial is, in fact, any building or land intended to generate a profit, either from capital gain or from rental income.

The majority of commercial properties are mainly made up of offices, retail properties, industrial sites (such as warehouses and factories) and leisure property, like restaurants. However, there are more alternative commercial properties to choose from, such as schools and petrol stations.

There are several ways to invest in a commercial property, and one may suit you better than another. Speak to your local commercial property expert or estate agent to find out the best one for you and your options.

Why Invest in Commercial Property?

Investors (distinct from occupiers) now own approximately £486 billion worth of commercial property in the UK, representing 55% of the total. According to the report, over the longer term, commercial property tends to deliver investment returns that are higher than gilts (British government issued bonds – generally considered low risk investments) but lower than equities.

With recent tax changes for landlords, it is no surprise that investing in commercial property is becoming an increasingly attractive option for many properties – and people considering it.

With any significant investment, it is important to weigh up the pros and cons for your situation and understand what investing entails; there are numerous benefits which come with investing in a commercial property:

  • Provides a steady stream of income – If you rent out your commercial property, you’ll receive rental payments from your tenant as long as you rent it out.
  • Capital growth – There’s a possibility of increase in value over time and you could make a good return on your initial investment if you sell. If you are proactive in your commercial property management, you can also reduce your costs and increase your profits.
  • Relationship with Tenant – your relationship will most likely be more professional than that of a residential tenant.

Top Tips for Commercial Property Investment

  • Find a Property – If you can, you should find the right time to buy a commercial property. Make sure you investigate trends in both the local and national market and explore factors such as values, supply, availability, tenant availability, rental values and competitors. You can do this with your commercial property estate agent.
  • Location and Building Type – You should take into consideration the type of property, type of investment, size, and location you are looking for. You should also think about how it will suit business needs, be it yours or your tenants. Does the property have transport links nearby, parking facilities, local amenities in the surrounding area, and so on?
  • Class of Property – Commercial property is divided into classes under The Town and Country Planning Order 1987, which determines how each property is occupied. You must make sure that you are in line with the legislation when it comes to planning use.
  • Planning Permission – What are your plans? If you aim to redevelop or expand, then make sure you can. It is important that you seek advice from the council and a commercial estate agent on the feasibility of this.
  • Costs Work out the costs first. Generally, a deposit is required when contracts are exchanged; however, there are many other costs to take into account, ranging from VAT to Stamp Duty. Seek out professional advice on this if you aren’t 100% sure. Don’t forget about running costs such as energy usage and tax.

If you are unsure about where to start when it comes to looking for the perfect commercial property, you should speak to a commercial sales and lettings expert such as Fisher Wrathall.

Fisher Wrathall are the area’s leading Commercial Agency, covering Lancaster, Morecambe, and surrounding areas. We can handle the sale, letting and management of all commercial property types.

Whether you are looking to invest in or sell a commercial property or are interested in simply finding out more information, get in touch with our team for a free and confidential consultation on any commercial property matter.