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UK Property Finance

Commercial Property as a Buy To Let Investment

by | May 22, 2017 | Mortgages

Owing to recent tax relief changes that came into effect in April this year, a growing number of buy-to-let investors have found themselves turning their backs on domestic rental properties in favour of commercial investments as a more favourable opportunity.

In addition to this, some buy-to-let experts are also considering venturing out into more complicated areas of rental accommodation, such as multi-occupancy homes, which are popular with students who are studying away from their paternal nests.

Another area that is attracting an unusually high level of interest from buy-to-let landlords is semi-commercial property investment. This is where one part of the building is used for business reasons, such as a high-street bar or restaurant, and another part of the same property contains a residential flat.

Whereas the residential buy-to-let sector is experiencing a number of difficulties, the commercial property rental market is seemingly unaffected by recent changes, with industrial units being the primary candidate for healthy investment with serious returns.

Why choose commercial leasing as an investor?

The most significant advantage of investing in a commercial property with a view to letting is that the rents are typically much higher than with similarly priced residential lettings. This is a particularly appealing option at a time when most landlords have found themselves having to seriously think about lowering their costs while improving profit margins.

Although retail premises and office spaces are currently performing somewhat less admirably in the commercial letting arena when compared to industrial offerings, the commercial property sector as a whole is doing relatively well at the moment, with demand for such lettings consistently on the increase.

The effects of the Brexit vote

Another factor that is influencing this shift of focus is the Brexit effect and, in particular, the wide degree of uncertainty it caused. The most obvious result of this new period of insecurity was a dramatic increase in the number of low-cost commercial property investments entering the market.

‘The slowdown in the investment market during the summer months did inadvertently create a catalogue of available assets marketed at “Brexit factored” prices,’ read a recent report published by Knight Frank.

‘This was pivotal in delivering the strong uplift seen in Q4, which represented the fastest quarter-on-quarter growth in investment volumes for three years. Overseas investors continued to dominate, with £24 billion directly invested in UK commercial property in 2016, accounting for 49 percent of all investment.’

As the government seeks to make life more and more difficult for those in the residential buy-to-let sector, those letting commercial properties as a means of generating revenue seem to be having a much better time of things, with a growing number of UK investors choosing to abandon their domestic rental properties in favour of a more profitable experience.

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