Historically, commercial property investment has often provided safer investment prospects than residential units. Why? In theory, because commercial property investment yields from owning multiple units are relatively high. Several sources of rental income ensure investors’ losses are reduced and cover any occupancy voids. Commercial investment property typically comes with long-term leases that can last for ten years or more and, if a tenant defaults on their payments or even goes into liquidation, the liquidator often pays the rent, indicating that investing in commercial property is a relatively safe option.
As far as returns are concerned, commercial tenants generally pay for the insurance, maintenance and other outgoings on their properties, a situation which gives the landlord a clear return. In addition, when compared with residential property which can provide higher capital growth opportunities, commercial premises attract lower but steady growth, accompanied by high annual income returns. This is particularly attractive to investors seeking income now, rather than at a later stage of their investment strategy.
Nevertheless, in terms of property investment, commercial landlords have in practice seen the worst downturn in performance since the Second World War. According to the IPD, rental recovery has been slow outside centralLondon: average rents inLondon’s West End increased 7.4% in March 2011 but in the rest of theUK, they fell by an average 2.3%. Although the economy still has a long way to go before regaining its strength, experts predict that it will recover over the next two to three years, led by the office space sector for business services firms in London with strong exposure to the global economy. John Kelly offers commercial property investment advice at Chelsea Financial Services. He confirms: "The average yield in the commercial property market in theUKis rising - now standing at approximately at 6.5 per cent. Even when you take away inflation, currently 3.4 per cent, commercial property is still yielding 3.1 per cent."
For buyers seeking worthwhile commercial property investments, UK real estate still has its advantages, and many shrewd investors opt for commercial property investment funds. These property funds allow them to deal in property-related shares, investing in entire office blocks and shopping centres or in a combination of property and shares in property companies. This achieves investors a relatively risk-free vehicle with which to receive long term returns from capital growth, along with ongoing income from rental yields. In addition, commercial property investment funds bring opportunity for a convenient, hands-off investment, using the assistance of a professional and experienced property fund manager who will ensure diversification into many sectors and ensure investors gain the greatest opportunity for a successful exit strategy.
*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.