Investing in Commercial Property

Traditionally, investing in commercial property has been the province of the professionals and the institutions - the big agencies, pension funds and insurance companies.

But you don't need to be a property professional to appreciate the benefits of investing in property, particularly in a financial world which is so volatile as it is today - the stock market with its ups and downs (mainly downs as we write - July 2004), the financial scandals and the pension fund scares.

Individuals who have seen the benefits of residential property investments in houses and flats, which can be rented out, are now beginning to realise that commercial properties like shops, offices and workspaces have the ability to provide substantial returns and a high income.

In fact commercial property has been the best performing asset class over the last 10 years or so, outperforming equities and gilts by a good margin.

  See the PowerPoint™ Slide Show of the Commercial Property Investment Seminar - Property Investor Show - September 2005

The Guide to Commercial Property Investment

If you're looking to invest in commercial property for the first time, then this guide is certainly the answer. It contains a substantial amount of invaluable information and contacts which are not easily obtained elsewhere.

Written by Kevin Smith and Richard Bowser - Editor of Property Investor News the guide is published in a 68 page - A4 booklet format, which has a structured layout, enabling quick access to the many sections contained within.

Purchasers of this guide during 2005 will receive any revised content updates as they are published - free of further charge.

Buy this UK Guide now, on-line from LandlordZONE™ (in association with Property Investor News) using our secure payment system - WorldPay - a part of the Royal Bank of Scotland Group. LandlordZONE™ 30-day money back guarantee.

• Contents include:
• Introduction to commercial property investment
• The benefits of investing in commercial property
• Historical perspective
• Yields and capital growth
• Tenant’s legal obligations
• Which market sector: Retail, Office, Industrial, Business & retail parks
• Motor trade
• Financing your investment

• Legal considerations
• Commercial property taxation
• Valuing commercial property
• Sourcing commercial property
• Commercial property auctions
• Buying from agents
• Using managing agents
• Assessing the risk
• Case studies and examples of investment options
• List of commercial contacts and sources of further useful information

Diversify your Investment Portfolio with Commercial Property:

Investment in a commercial property can provide secure log-term income streams and steady capital growth: it can help you diversify your investment portfolio from residential property, shares and bonds. Like all investments though, commercial property is not without its risks:

• Commercial properties generally need a bigger initial investment than residential properties, though you can invest collectively into a syndicate.
• The property will need to be managed
• Each property is unique and cannot be moved, so its location is vital and so is its local economy. Tenant demand is the key.
• Unlike shares, where you can pick up a telephone and "sell", commercial properties can take months or even years to dispose of.

Given these downsides, there are also some substantial advantages to being the landlord of a commercial property:

• Commercial properties typically let for long-terms - 10, 15 and even 25 years is not uncommon, though generally the lease lengths have come down in recent years, reflecting the uncertainties of operating businesses in the 21st Century.
• Tenants generally accept the custom and practice of insuring and repairing leases in the UK - the tenant pays ALL outgoings which gives the investor landlord a clear return.
• Whereas residential property has recently given high capital growth (particularly over the last 10 years) commercial properties provide low but steady growth, but a high income return.
• This latter point particularly suits the individual who needs income now - compare the low building society return of perhaps 3.5% with a return of between 8% and 20% from a good solid commercial property investment.
• There are some tax advantages which involve incorporating a commercial property into a pension plan - a SIPP, though this is not for everyone.

For more information on commercial property investment download this PowerPoint™ presentation given at the Property Investor Show, London 2003 by LandlordZONE™editor Tom Entwistle

New opportunities - but exercise caution:

New financial products coming along in 2005 onwards could open up the commercial property investment market to the smaller investor - perhaps those who have developed a taste for property investment through the successes they have experienced with buy-to-let - a market some feel is running out of steam.

New investment vehicles could mean that instead of needing millions of pounds for "prime property" investments, the smaller investor will be able to participate with thousands, by buying a share in an individual property, or a managed portfolio.

However, as Gramham Chase, RICS commercial property spokesman warns: ‘People may feel comfortable with property as an asset class through experience with the residential sector but the commercial market has its own dynamics and, while offering great opportunities, it also holds particular risks. At the moment we know that many financial advisers are not qualified to give advice in this area.’

Those considering a move into commercial property, either directly by buying a property, or indirectly through investment vehicles, need to do their homework - that means doing the reading and research.

Investors should also be careful about paying way over-the-odds for advice which is readily available for free or at a much reduced cost.

For example, as a recent Which? report has highlighted, individuals are paying thousands to attend "get rich quick" property millionaire seminars costing up to £6,000 when in reality they could get the same information and advice by buying a package of selective books costing no more than £60.

A subscription to a reputable publication such as Property Investor News, who also run regular property investment seminars costing hundreds, not thousands, is an excellent way to get started.

So too is joining an organisation like the Property Investors Club who are now starting to run reasonably priced Commercial Property Investment Training Courses