Expanding your property portfolio through strategic commercial investments

Commercial Investment

Commercial property acquisition as part of a strategic investment plan offers many benefits. It can provide a steady, long-term stream of income as well as generate profits from the increase in property value over time.

By carefully considering why you’re making the investment and clarifying your main objectives, you can decide on the level of risk you want to take on and examine the potential rewards.

So apart from being clear on your goals for expanding your property portfolio, what else do you need to consider?

Some considerations around commercial property investment

How much you can afford to invest

Determining how much you can afford to invest will direct you towards the right type of property and location. It’s important to factor all ongoing expenditures into the total investment amount to ensure unexpected costs don’t cause a problem further down the line.

What type of property to invest in

Do you already know the type of property you want to invest in, or are you interested in a range of different properties?  For example, if you have experience in a certain industry, such as logistics, warehousing may be an attractive option. Alternatively, you may choose to invest in a property fund.

Financing a commercial property investment

A commercial investment property mortgage could help you expand your property portfolio if you intend to rent out premises to other businesses. Property portfolio mortgages are also available to buy-to-let landlords so that multiple properties can be managed under one account.

The potential return on investment

A commercial lease is typically a longer duration than a residential one, which offers reassurance around income and the return on your investment. The risk of periods when the property may not be occupied must also be factored in, however.

Different types of commercial property investment

If you’re in a financial position to do so, you may decide to directly purchase a commercial property such as a retail outlet, or offices that you can rent out to local businesses and gain regular long-term income.

Investing in a commercial property fund is another option that can spread the risk between various types of property. Ultimately, however, your risk appetite will determine how you expand your property portfolio to achieve your main objectives.

Benefits of acquiring commercial property as an investment vehicle

Higher yield than residential property

Commercial properties typically bring higher rental yields than residential properties, although they do require more ‘hands-on’ management in general. Yields also vary across regions of the UK, so the location of your investment may influence the return on your investment.  

High-risk/high reward

You may decide to opt for a larger commercial property that offers a high reward in exchange for the higher risk you take on. It’s important to carry out careful research with any property investment, and particularly when the investment is high risk. Seeking professional guidance is highly advisable to maximise your chances of success.

Profit from capital growth

The amount by which your property investments grow over time is affected by various factors including their location. For example, if plans for regeneration or investment in the area are ongoing - perhaps improved transport links are imminent – this can boost the profits attained from capital growth.

Ongoing rental income

The longer-term nature of commercial leases, when compared with residential tenancies, makes commercial property investment an attractive proposition. They provide a reliable source of income that can be further supported by expanding your property portfolio, which protects your overall return should there be any gaps in tenancies.

The benefits of acquiring commercial property assets as an investment vehicle are clear, but initially, it’s essential to ask yourself what is the main purpose of investing. The answer to this will help you move on to find the best type of property investment and establish the level of risk that you’re willing to accept.

This article was written by Jon Munnery, an insolvency and company restructuring expert at UK Liquidators, a leading provider of company liquidation services to both solvent and insolvent limited companies.

Ed Edward Feather

Associate Director

About the Author

Edward is an experienced property auctioneer with over 15 years' property auction experience and considerable knowledge of the North West property market. 

Edward joined Pugh & Co in September 2018 from SDL Auctions in Chester. He was also a Director at the Cheshire and North Wales franchise of the Auction House business, based at estate agent Humphreys in Chester, before its acquisition by SDL in 2016.