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.
Disclaimer: The information on this page is for general educational purposes only and does not constitute financial, legal, or tax advice. Always seek independent professional advice before making property or investment decisions. Your property may be repossessed if you do not keep up repayments on a mortgage.
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