There was a time when mixed use developments were considered a necessary evil, frowned upon by many for their rugged, large-scale silhouettes imposing on out of town landscapes. Thankfully, things are different now. People have come to realise that such developments offer a chance to bring regeneration to cities that urgently require attention. It’s thanks to the creation of mixed use developments that the economy of towns and cities is improved and from them, hundreds of local residents are presented with job opportunities.
Adding a commercial property investment to your asset portfolio is proving favourable, particularly for those opting for retail or office space in the same building. But despite retail and office unit investments being dissimilar, many buyers are now finding that the returns of a combined purchase are better than expected. However, buying a commercial investment property has its pros and cons, all of which must be carefully weighed up before you sign any legally binding documentation.
Unlike residential property, investing in commercial property, such as an office will allow you to create a lease on the unit for up to 10 years. And if you decide to invest in a retail unit, it can be let for as long as 20 years, possibly even longer. This is a huge advantage, especially when compared to the generally low lease duration involved with a residential property investment. Commercial properties can be occupied for a greater amount of time, meaning you don’t have the hassle of finding new tenants every six to 12 months, nor do you have to worry about periods of void – when the property lies empty and there is no income being generated.
Generous tax breaks and higher rental rates also help lure buyers into commercial property investment. Yields are proving to be returned higher than most equities and even inflation-protected bonds, particularly with good quality commercial property investments. UK investors, according to the Financial Times, received 14 times more than the return they saw on cash funds back in 2010.
On the downside, however, it’s not necessarily easy to secure a commercial property investment. Funds are not always easy to borrow as many banks see mixed use developments as risky. This is mainly due to the fact that in order to be a success, the many different uses must all remain in business. Many money lending establishments see the more traditional single-use development as a safer option for providing construction and earning a profit.
Remember to apply caution and due diligence if you are determined to secure yourself a commercial property investment. Advice from those who have already purchased office or retail units should be taken on board if you are a first time buyer in this sector.
*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.