You Are Here: Home > Investing in Commercial Property
LandlordMONEY™ - secure property finance and the best property mortgage & buy to let deals from industry leading, reliable and competitive sources - in association with LandlordZONE® TenantVERIFY® LandlordDEALS™ and Homesavers Mortgages & Loans Limited - about us - read our terms of use. ...... NEW ! review our privacy and cookie policy.

Secure Property Finance™

Investing in Commercial Property

Commercial property investment has traditionally been the preserve of the professionals: the institutional investors like insurance companies, the pension funds and the church commissioners. But more recently the benefits of commercial property have started to become apparent to the smaller private investors, particularly those who have experienced the benefits of buy-to-let and want be a little more adventurous.

Go to any commercial property auction nowadays and you will find a new breed of smaller private property investor enthusiastically joining the professionals to tuck their money into this market.

Even though prices have rises considerably (yields have dropped) in a buoyant market as it now is, there's still bargains to be had if you are willing to take the time and trouble to find them.

Investing in commercial property has several positive advantages when compared to investing in residential property:

 
  • Generally the emphasis is on income - a higher income than residential property, albeit generally with a lower rate of capital growth.  However, when you add together the income return plus the capital growth on a commercial investment, over recent years, average total returns have been topping 20%.
  • Commercial leases are contractual as opposed to the statutory regulated ones for residential. This means that generally the landlord/investor has more protection if the tenant fails to pay rent or meet his contract commitments.
  • The Full Reaping and Insuring (FRI) lease agreement is accepted as the norm for commercial tenancies in the UK. This means that the landlord can expect a clear return on his investment, free from ANY additional costs.
  • Leases are agreed for much longer periods than the common 6 month tenancy agreement on a flat or house. 5, ten or even 15 years would not be unusual with a commercial tenancy, so generally there's a lot less management involvement needed from the landlord or his agent.
  • In addition to a longer lease, it's accepted practice to review the rent every 3 to 5 years. This means that the income return on the property is kept in-line with price inflation and the whole investment acts like a pension.
  • Its more common with commercial to buy properties already tenanted.
 

Commercial property investment has traditionally been the preserve of the professionals: the institutional investors like insurance companies, the pension funds and the church commissioners. But more recently the benefits of commercial property have started to become apparent to the smaller private investors, particularly those who have experienced the benefits of buy-to-let and want be a little more adventurous.

Go to any commercial property auction nowadays and you will find a new breed of smaller private property investor enthusiastically joining the professionals to tuck their money into this market.

Investing in commercial property has several positive advantages when compared to investing in residential property for several reasons:

  • Generally the emphasis is on income - a higher income than residential property, albeit generally with a lower rate of capital growth.  However, when you add together the income return plus the capital growth on a commercial investment, over recent years, average total returns have been topping 20%.
  • Commercial leases are contractual as opposed to the statutory regulated ones for residential. This means that generally the landlord/investor has more protection if the tenant fails to pay rent or meet his contract commitments.
  • The Full Reaping and Insuring (FRI) lease agreement is accepted as the norm for commercial tenancies in the UK. This means that the landlord can expect a clear return on his investment, free from ANY additional costs.
  • Leases are agreed for much longer periods than the common 6 month tenancy agreement on a flat or house. 5, ten or even 15 years would not be unusual with a commercial tenancy, so generally there's a lot less management involvement needed from the landlord or his agent.
  • In addition to a longer lease, it's accepted practice to review the rent every 3 to 5 years. This means that the income return on the property is kept in-line with price inflation and the whole investment acts like a pension.
  • Its more common with commercial to buy properties already tenanted.

If you get it right with commercial property your investment can produce a guaranteed long-term income stream - far higher than alternative investment types - with steady capital growth as well. Because commercial tenants sign long leases there's far less chopping and changing than with residential lets, where tenants come and go every 6 or 12 months.

Information here is general only & believed to be correct, though we cannot guarantee it, nor do we accept any liability if you act or fail to act on this information. Always seek professional advice before making decisions. Investments can go down in value as well as up over  time.