Investment Guide
Commercial Property
Invest in offices, retail, industrial, and mixed-use properties. Longer leases, institutional tenants, and different risk-return profiles compared to residential.
Types of Commercial Property
Office
From serviced offices to multi-floor HQs. Yields vary by location and tenant quality. Remote working has shifted demand.
Retail
High street shops, retail parks, and out-of-town units. Challenging sector but can offer strong yields in prime locations.
Industrial & Logistics
Warehouses, distribution centres, and light industrial units. One of the strongest-performing sectors driven by e-commerce growth.
Mixed-Use
Commercial ground floor with residential above. Diversified income streams and potential for permitted development conversions.
Key Differences from Residential
- Lease lengths — commercial leases are typically 3-25 years (vs 6-12 months for ASTs)
- Tenant responsibilities — under Full Repairing and Insuring (FRI) leases, the tenant covers all maintenance and insurance
- No Section 24 — mortgage interest is fully deductible for commercial property
- Business rates — paid by the occupying tenant, not the landlord
- VAT — commercial property transactions may be subject to VAT (option to tax)
- Higher deposits — typically 25-40% for commercial mortgages
- Void risk — void periods can be longer and more costly than residential
Assessing Commercial Deals
Commercial property is valued primarily on income. The key metric is the capitalisation rate (cap rate) — net operating income divided by purchase price. Tenant covenant strength (financial reliability), lease length remaining, and break clauses all significantly affect value. Always instruct a RICS-registered commercial surveyor for valuations.