Landlords are turning their attention to the commercial property sector, with recent research from Shawbrook suggesting that 19% are mulling over the idea of venturing into this space. Amidst the backdrop of economic fluctuations and property market ambiguities, the push for diversification seems to be driving landlords to contemplate this pivot. A notable 37% of those poised to step into commercial property have identified diversification as their primary motivation.
Existing commercial property owners aren’t left behind in this shift. About 35% of landlords who already possess commercial holdings express intent to augment their portfolios. Furthermore, the general sentiment amongst landlords is largely positive. 36% have acknowledged a rising demand for commercial properties, deeming them as lucrative investment opportunities. This sentiment is strengthened by the view of a quarter of landlords who feel there’s a scarcity of high-calibre properties tailored for businesses, hinting at a potential avenue for development or repurposing initiatives.
A commendable 29% of landlords view their foray into commercial properties as a medium to fortify their local communities. Their investment preferences seem inclined towards both small (33%) and expansive (30%) retail spaces. As high streets gradually transition towards hosting more local, niche, and experience-centric outlets, landlords emerge as potential catalysts in rejuvenating UK’s town centres. The ongoing hybrid work model has also seen many employees operating outside cities, inadvertently amplifying prospects for local businesses in towns and village hubs.
The evolving nature of work has inevitably shifted the dynamics of office space requirements. Recent data from Rightmove has recorded a surge in demand for offices, whilst IWG’s findings indicate that 50% of companies have unveiled workspaces beyond city confines. Landlords are noticing, with 36% considering office spaces as a part of their commercial portfolio expansion. Their diversification interests also encompass:
• Industrial or manufacturing locations – 28%
• Warehouses or distribution centres – 28%
Emma Cox, MD of Real Estate at Shawbrook, remarked, “Fluctuating prices and high borrowing costs are hampering confidence in the residential property sector.
As a result, landlords are looking for other ways to diversify their portfolios and cater for current demand. The increase in workers returning to offices and the evolution of local highstreets are two examples of areas where landlords will be seeking opportunities to invest, and those who already own commercial properties will be looking to add more. Landlords could become the unsung heroes of the high street, with many planning to support their local communities by injecting new life into commercial properties and retail units.
Commercial property is certainly a good prospect for those who have typically specialised in the residential market and are looking to adapt their strategies now or in the near future.”
