With continued signs of growth in the UK economy, the property market is also showing signs that it is strengthening too, particularly in commercial property, so is this the right time for you to consider putting your money into commercial property?

If you read the figures about the economy, these are showing that capital values rose by 0.4%, which is the first increase in a year and a half. Our GDP also rose 0.6% in the same period, also pointing to an upturn in the economy.

A Strengthening Economy And Commercial Property

Growth in the economy has had a positive effect on the returns you can expect to receive from a property investment and one sure sign that the market is improving is the increased demand for rental property outside of London.
Because of these positive signals and because investors have been looking for a way to get better returns on their money because of low interest rates which are hitting savings and look set to continue for some time, there has been a move towards commercial property.

London is always a sought after location in both residential and commercial property, but this means that often prices are inflated which results in lower rental yields from your investment, but there are other things you will need to consider before you purchase. They are:

  • Location – is the location well suited to having a commercial property?
  • Tenants – are there people in the area who are looking to rent commercial property?
  • Type of property – if there are tenants looking for property, what type of property are they looking for?
  • Lease Length – consider whether you are looking for long term or short term tenants

The Risks Of Trying To Time The Market

Trying to time the market is often futile

Image by David Reber

If you’re investing in commercial property to try to capitalise on a perceived broader trend, the advice will be the same as for any class of investment; watch for good long-term returns, not short-term increases in values.

Warren Buffett talks specifically about this investment strategy in his latest letter:

“With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations.”

Specifically, if you aren’t an expert on commercial property and commercial property investment, you should consider investing in commercial property primarily as one part of a diversified portfolio of investments.

Good Yields In Investment Property

All of these factors will make a difference to whether your commercial property will be a good investment or not but as with any investment, there are no guarantees, despite all your planning and research. There are good yields to be had outside of London, sometimes as high as 9%, which when you compare this with what you will get from a bank is certainly attractive, but it is a risk.

Whatever you decide to do, to lessen the inevitable risk you should do plenty of research to ensure that if you do decide to buy, that you give yourself the highest prospects of success.

For more information about this article or any aspect of our commercial property legal services, please call us on 0800 142 2775 or reply to this email and we will be delighted to help you (there is no charge for initial telephone discussions).