Investing in commercial property in the UK: advantages and tips

The first thing people usually think about when it comes to real estate investment is buying residential space for resale or rent it out. On the one hand, that is right, because the demand for housing in the UK continues to grow. But in reality, the property market has many types of objects. Investors seeking higher returns should consider investing in commercial real estate.

What is commercial real estate?

Among the commercial properties, there are dozens of types of premises: from office buildings and shops to hotel complexes and restaurants. It also includes:

• shopping malls
• co-working centres
• private health-care facilities
• beauty parlour
• hotels
• pub
• street shops
• warehouses
• gyms
• parking.

According to the British Property Federation, the share of commercial realty in the UK is 13% of the total number of buildings. The volume of this market is more than 900 billion pounds. The choice is quite wide, so choosing property should be based on personal preferences, budget, location of the object and profitability analysis. There are also several ways of investing:

• direct way – purchase of an object;
• indirect way – investment of shares or bonds of institutions dealing with real estate.

hat are the benefits of investing in commercial property?

Among the main reasons why commercial real estate is an attractive passive income option, experts cite a longer lease term than would be expected from a residential real estate tenant. According to Nicolas Holmes, a real estate expert at Robert Holmes & Company, on average, commercial leases range from 10 to 15 years.

Among the significant advantages, he also noted:

• Stamp Duty is lower than in the case of residential property
• You have fewer obligations to tenants
• Landlords of commercial properties have more reliable legal protection.
• Stable profit on fixed terms and lower costs.

 

Tips for investors

When investing in commercial properties, your profit in most cases will depend on the level of infrastructure development, location and socio-economic factors. According to Dmitry Leus, entrepreneur and founder of Imperium Investments, a property development company, one should first pay attention to the profitability of the project. That is, one store in a shopping centre will cost you as much as several warehouses, but the profit may be many times smaller. He advises paying attention to the second option, because in the era of e-commerce development, the demand for warehouses will be very high, and the costs of purchasing and maintaining such facilities will be much lower.

In addition, according to Mr. Leus, indirect investments are a good option for those who are not prepared to purchase real estate on their own.