Many landlords are looking to diversify their portfolio and commercial property provides a great alternative to the usual residential buy-to-let route. For those who are new to commercial property investment, Property solicitors Abacus have put together a guide to help you decide if investing in commercial property is for you.
Types of commercial property
If you’re looking to invest in commercial property, there are a range of options to consider. In the UK, 70% of commercial buy-to-let space consists of shops, with offices, restaurants and gyms also proving popular.
Depending on the space you invest in, you may be able to let the property to multiple tenants, in order to further diversify your portfolio and reduce risk.
When choosing a tenant for your commercial property, there are different steps you should take compared to finding residential tenants.
As well as carrying out reference checks on any individuals named in the lease, you should carry out due diligence on the company themselves. The Companies House website is a good place to start, but you can also ask for opinions of the business locally and visit them in person, to get a better feel for their operations.
Commercial property tenants are likely to be more business-minded. They tend to take on more financial responsibility for the property in the form of paying for utilities, maintenance and insurance. This helps to reduce the risk of your investment. Business tenants will also be more likely to keep the property in a good state of repair to attract customers and clients.
Benefits for landlords
Investing in commercial property provides a whole host of benefits for landlords. Commercial leases tend to be longer than residential tenancies, reducing the stress of high turnover rates. Rent is also higher for businesses, helping to bring in more money and making commercial property a more lucrative investment. As commercial tenants are responsible for maintenance and other necessities, such as utilities and insurance, commercial property offers a more hands-off option for landlords.
Commercial property is an attractive investment, with longer lease terms and often more stable clients than traditional residential properties. It provides opportunity to diversify your portfolio and, with lower turnover rates and higher rents, can bring a wealth of benefits to landlords.