In the past few months, due to the uncertainty around the Covid-19 pandemic, the property market in the UK has had its ups and downs.
During the first lockdown, the government completely banned real estate transactions, which led to a lull in the market and affected the commercial property agents, in London.
Once the lockdown lifted, the market saw a mini-boom. To boost the economy and increase buyers’ confidence, the UK government announced various schemes such as the Help to Buy scheme, the mortgage guarantee scheme, and the stamp duty holiday.
In some areas, house prices started to soar, whereas, in others, the prices dropped. This bridging finance calculator will help to figure it out. Some homeowners and property investors profited, while others suffered.
Many tenants also shifted out of their rented homes, as they could no longer afford the high rents. Hence, due to the lack of demand, the average rental price started to fall too. Landlords suffered, as their buy-to-let properties were no longer giving them any profits.
However, the commercial property market was largely unaffected. For those property buyers and seasoned investors looking to park their money in real estate, these are the benefits of investing in commercial property in the UK.
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1. Commercial investment is fruitful
While the cost of accruing a commercial property and refurbing it might be higher than the costs involving residential property, the returns are much higher too.
Also, commercial rentals are very high, which allows owners to make a huge amount of profit. The higher the investment amount, the higher the profit.
2. Long-term lease agreements are beneficial
Usually, commercial properties are given out on a long-term lease such as 8 years, 10 years or 15 years. In contrast, residential properties are given out on a much shorter lease, allowing property owners to sit back and relax without worrying about finding new tenants every few months.
3. It is a safe and stable investment
Since the lease on a commercial property is a long-term lease, and the rent is usually high, the owner will get steady payments for years.
If you compare the return on investment and the risk factor to other investment sectors such as the stock market, then investing in commercial property is pretty safe.
4. Repair and maintenance are managed by the tenant
In residential homes and buildings, the landlord is usually responsible for repairing and maintaining the property.
However, when it comes to commercial properties, the tenant is responsible for maintaining the building and seeing any repairs and damages.
5. Commercial property owners are protected by law
Residential lease terms have statutory protection, whereas commercial lease terms are contract-based. Commercial property owners are protected by law, so if a company fails to pay the rent on time or does not follow contractual obligations, legal action can be taken.
6. Direct ownership allows the development
When an investor owns a commercial property, they can renovate and redevelop it based on the occupancy and changing demands. So, in the long run, the owner can modify the commercial investment to meet modern requirements and demands.
So, instead of renovating the property 15 years down the line, commercial properties can be altered and renovated almost every year as one would with a residential property.
You could also utilise bridging finance if you want to finance a time gap between the development and sale of your new commercial property development.
7. Property value increases over time
Usually, in the case of commercial properties, the property value continues to grow slowly and steadily.
And, since owners can renovate and redevelop their property per their wish, the property value will only continue to rise as the average price of commercial property in the area rises.
At the end of the day, the owner not only makes a profit on their investment but on the capital too.
8. Stamp duty is not very high
The stamp duty on commercial properties is cheaper than the stamp duty on residential properties, especially for residential properties costing over £1 million or more.
Also, when an investor purchases a buy-to-let property, he or she has to pay an additional 3 per cent on top of the stamp duty, which a commercial investor is not required to do.
If you are thinking about investing in a commercial property in London or anywhere in the UK, contact commercial property agents, in London.
In conclusion, investing in commercial property in the UK offers several benefits. Firstly, it provides a stable and reliable income stream through rental payments, as commercial tenants often sign long-term leases. Additionally, commercial properties have the potential for capital appreciation, allowing investors to profit from property value appreciation over time.
Furthermore, commercial properties are considered to be less volatile than residential properties, providing a level of stability and security to investors. The UK’s strong and diverse economy, along with its favourable legal and regulatory environment, make it an attractive destination for commercial property investments. Moreover, investing in commercial property can offer tax advantages and potential tax deductions.
Finally, the demand for commercial properties remains consistently high, especially in prime locations, ensuring a continued demand for rental spaces and the potential for high occupancy rates. Considering these benefits, investing in commercial property in the UK can be a rewarding long-term investment strategy.