Commercial Property Investment
Specialist commercial property investment solutions for investors.
Investment Property Partners is a leading commercial property investment specialist serving clients throughout the UK and internationally. Our experienced commercial property team focus on delivering exciting high quality investment opportunities that offer significant income and capital growth potential.
Commercial property is very much bang on trend for many investors when it comes to investing in property.
Commercial property can provide good, solid and reliable investment returns and is perfect for those market savvy investors who are prepared to work to get what they want. As with all good things, however, there is an element of risk involved.
A decision to invest in commercial property is not one that should be taken lightly however; it often requires significant financial outlay, serious thought and demands a significant degree of expertise and access to good market intelligence.
With this in mind, we would recommend that before you decide to invest in commercial property you carefully understand the potential investment risks you will face, their impact and how to manage them more effectively.
One thing’s for certain though, investing in commercial property can be highly rewarding – if done properly.
Interested in Commercial Property Investment?
If you’d like to learn more about investing in commercial property and how we can help, if you’d like to receive information about commercial property investments for sale, including our off-market investment opportunities or if you’d like to discuss your requirements in more detail please contact us today:
Benefits of Commercial Property Investment
Investing in a commercial property can provide a secure and impressive long-term income stream as well as steady capital growth.
For larger private and corporate investors it can also help to diversify your property investment portfolio.
There are many other advantages which may whet your appetite for a journey in to the world of commercial property investment.
One of the biggest advantages is that commercial properties are typically let on longer lease terms than their residential alternatives.
In the UK commercial property leases extending to twenty and even twenty five years are not uncommon.
This means that your rental income is pretty much nailed on for much longer than any other property investment avenue.
Tenants of commercial property will also normally accept the UK custom and practice of full repairing and insuring leases (FRI leases) – this is where the tenant takes full responsibility for and pays all outgoings, leaving the landlord with a clear financial return.
When it comes to commercial property, there is also a low steady growth in capital value, but usually a higher income in the form of better rental returns.
Rental income on commercial properties is typically consistent and is ideal for investors who may prefer to focus on a regular income stream as opposed to stronger capital growth.
Managing your Property Investment Risks
These advantages are just the tip of the iceberg when it comes to commercial property investment.
If this particular area of investment appeals to you however, you should make sure you understand how the sector performs, what it involved and how this all fits with your own investment objectives.
Make no mistake, it is imperative that you know exactly what risks are involved before you make any final decision about investing in commercial property.
Property Market Intelligence & Research
First and foremost, you should clearly establish the types of commercial property you want to invest in and then learn the basics.
Ask yourself… What type of commercial property do I want to invest in, will I be able to manage it effectively, what will the likely return on my investment be, and will this meet my objectives?
Offices, shops, industrial buildings, warehouses and the like can all be classed as commercial property in which to invest.
With sufficient funds, you will be able to purchase these types of property and then rent them out to companies or individuals who, in return will pay you a regular rental income for a fixed or rolling term.
If you’ve prepared well and done your research you should then hopefully be able to turn a profit on the original purchase price paid for the property with these regular rental payments, and you may also be rewarded by some capital growth in the value of the property.
On paper it can all seem pretty straightforward…
Preserving Wealth with Property
What many investors do not realise about commercial property investment is the fact that it has little correlation with the day-to-day performance of stock market equities and bonds.
This means that in uncertain times and periods of market volatility, commercial property can actually help to preserve wealth.
With this in mind, and the promise of regular rental payments, many investors are beginning to recognise just what well-chosen commercial property investments can do for them.
If you fall in to this category and believe it is something you would like to know more about, you may want to familiarise yourself with the practical process of investing in the commercial property sector.
Alternative Routes to Investing In Commercial Property
Other than direct investment where an investor purchases a property to own it outright, there are a number of alternative ways to invest in commercial property, and each will appeal to different investors and their investment objectives.
For risk averse investors who are not keen on taking on too much risk, investing indirectly through an established property fund, Real Estate Investment Trust (REIT) or even a well managed Peer-to-Peer investment opportunity is probably a good way to get a foot on the investment ladder.
Property funds and real estate investment trusts are generally split into two types – a traditional bricks and mortar fund or a property securities fund.
A traditional bricks and mortar type fund will invest in property assets directly, whilst a property securities fund will invest indirectly in the shares of listed property companies.
In general, property funds are cheaper and represent an easier way to gain exposure to commercial property as an asset class.
Peer-to-Peer (P2P) lending and investing is a more recent development and has been successfully applied to both property investment and property finance.
Peer-to-Peer lending in simple terms allows property companies, active investors and property developers to borrow money directly from a collective of individual investors and private individuals without going through a traditional financial intermediary such as a bank or other traditional financial institution.
Investment returns on Peer-to-Peer transactions can be attractive for investors although there are additional risks which must be carefully considered before any investment decisions are taken.
For investors willing to put in the research, investing in commercial property is a great opportunity to generate some serious rewards, and whilst the path to gaining these bonuses does require knowledge, hard work and time, property lovers and investors with a strong business head will certainly get a buzz from the compelling and intriguing journey.
Always remember, the rewards are there, but only for those investors who are prepared to put the effort in, and at times take carefully calculated risks.
Commercial Property Investment Risk Management
As with any kind of investment, you will be exposed to an element of risk when investing in commercial property, and there can be some specific disadvantages associated with this form of investment.
Luckily though, many of the major issues can be dealt with successfully if you are prepared to do your research, get good advice and factor into account any potential risks… preparation is a key factor to your future success.
Lease Covenant Strength & Property Location
Two of the biggest considerations you have to make when it comes to commercial property are lease covenant strength (the financial stability of the tenant) and location desirability.
The stronger, more financially secure your tenant is the less chance they have of defaulting on their rental payments or going out of business.
Location specific factors including good tenant demand are important to the success of your property investment, as is the presence of a good local infrastructure including transport and communication links, Government backed investment and regeneration initiatives, the availability of a skilled workforce etc.
On-Going Property Management
Another aspect to take in to consideration is the fact that as a landlord/property owner you will need to physically manage your property, your tenants, collect rents, deal with income and expenditure, building maintenance issues, new lettings, rent reviews, disputes, legal issues etc. – so always be prepared to step in should anything warrant your input.
Even though you will be receiving regular rental income and your tenants will under a full repairing and insuring lease be maintaining the property, you have to remember that it is ultimately yours and so your responsibility, so you should never expect to reap all the rewards without having to put any work in from time to time.
On this note you may wish to consider outsourcing the day-to-day property management responsibilities of your property assets to an expert team well versed in such matters such as Investment Property Partners… property management →
Larger Capital Investment
Another potential hurdle that you may already be aware of with regards to investing in the commercial property sector is the amount of money needed in the first instance.
Commercial properties are generally more expensive than residential buy to let investment properties and are likely to require a far larger initial investment in the form of a cash deposit.
Liquidity of Commercial Property Assets
Finally, you should recognise that investing in commercial property is a medium to longer term investment.
If you need access to your cash quickly then commercial property investment may not be for you.
Typically, it is unlikely you will be able to dispose of your property investment as quickly as say a smaller, less valuable buy to let residential property or indeed shares in a property company, so you need to be certain that the direct investment approach is the right one for you.
Ideally, you should also have funds in place to prepare for such situations.
In some instances, commercial property, especially in difficult financial times, can take months or even years to sell on, so be prepared for the worse and you will be fine.
Bearing all the above in mind, it is easy to see that commercial property really does boast plenty of exciting opportunities – especially if you prepare well and research accordingly.
With the right attitude and good professional support, commercial properties like shops, offices, workshops and warehouses really do have the ability and promise to provide substantial investment returns.
Expert Commercial Property Investment Solutions
As leading independent property investment specialists Investment Property Partners offer expert advice and support to clients across our specialist areas of expertise helping them to achieve their investment objectives.
If you are a property investor or property owner seeking to acquire or dispose of commercial property assets, or enhance the value of your existing property portfolio contact our commercial property investment team today to discuss how Investment Property Partners can help you.
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Further reading…
More information about commercial property and real estate investment… here →
