As the residential buy-to-let market becomes ever more popular, the commercial property market is becoming an attractive alternative to experienced landlords looking to diversify their portfolio. Mark Alexander, Managing Director at The Money Centre, reports.
Residential landlords are widening their portfolio with commercial solutions and diversifying from two-bedroom flats with industrial units, shops and office developments, and, as a result the market is expected to boom.
With an improved economic outlook in the UK, combined with low levels of development, demand for accommodation has risen - and is forcing rents up. In major cities such as Norwich, the office market is showing distinctly higher prices after three years of falling rents. And most industry professionals identify the retail sector as the star performer. Out-of-town shopping malls and outlets are predicted to outperform this year, some experts are suggesting that retail returns could top 20 per cent, with retail warehouses likely to overtake the high street in profitability. The office sector will continue to lag behind retail and industrial sites with an average total return of 9.7per cent last year. Nonetheless, investors are still keen, buoyed by 2004's figures which present the best returns since 2001.
Commercial property covers anything that isn't residential: shops and offices, restaurants and pubs, doctors, dentists and vets surgeries, hotels, sports centres, factories, workshops, garages, hospitals and schools. There are a couple of differences between commercial and residential property investment; the main one being the tax advantages not available to most residential property investors including capital allowances, superior taper relief on capital gains and Stamp Duty Land Tax exemptions.
The average residential tenancy is between six and twelve months, while commercial leases can run from between 10 and 35 years and have regular rental increases. Commercial tenants have to cover the building's maintenance cost, which isn't the case with private tenants, thus making commercial property investment a long-term commitment but one that is relatively secure, and hassle free. Commercial investment requires a different set of skills than residential investment, and local and national economics influence the market as well as price fluctuations.
In the past commercial buy-to-let has essentially been out of reach of many investors for a number of reasons: firstly potential landlords must laboriously produce profiles on tenants, themselves and the property; then there's the bureaucracy, red tape and restrictions; and finally there's the question of funding.
However, with The Money Centre to help; entering the commercial marketplace needn't be a daunting prospect. We have literally hundreds of collective years of experience and our consultants are ready to help you at every stage of the process. For a commercial loan quotation fill-in our online application form or Tel: 0207 613 9999.
