Agents’ trade body Propertymark says more investors are exploring commercial property opportunities in preference to the residential sector.
It says increasing tax, regulatory and compliance obligations affecting residential landlords are prompting some investors to reassess their portfolios.
And it believes commercial assets operate within a legislative framework that is often viewed as less restrictive.
While commercial property presents its own challenges, including higher entry costs and more complex transactions, agents say they are seeing increased enquiries from investors seeking to diversify or transition away from residential investment.
Market insight: Investors seeking greater freedom to invest
Michael Sears, member of the NAEA Commercial Propertymark Advisory Panel, says: “Interest seems to be building from investors wanting to invest in commercial property over residential, mainly because there is less of a legislative stranglehold.
“Investors tend to often be those converting their residential portfolios to commercial as the entry barrier financially to commercial is generally higher, with lower loan-to-value lending typically available.”
He adds: “Industrial and warehousing remain equally as buoyant, with prospective tenants matched to property in short timescales.
“Large open-plan offices continue to struggle, although both supply and demand remain low. Small offices in business centres, however, continue to perform well.”
Market insight: Growing appetite for commercial investment
Steve Lane, member of the NAEA Commercial Propertymark Commercial Advisory Panel, comments that while demand from larger national retailers remains subdued, some independent operators continue to drive activity within the retail market.
“At present in the retail arena, demand from the large multiples for the larger units remains subdued whereas, in contrast, some independent operators remain active.”
He notes that increases in rateable values and employment costs have affected business confidence, although many occupiers continue to commit to commercial premises despite these pressures.
And he states: “The industrial sector continues to be resilient, and the office sector overall remains muted but with more activity for the letting of smaller offices and suites.”
He also highlights a notable shift in investor behaviour. “An interesting market trend is that we are seeing fresh investors seeking more in-depth advice where they are considering pivoting and perhaps investing in commercial property rather than residential property due to the changes in the private rental sector.
“Many of these investors need guidance on the differences between the tax and regulatory structures of the two markets. This includes borrowing ratios, tax liabilities, and regulatory obligations.”
