ARE YOU A RESIDENTIAL INVESTOR? HAVE YOU CONSIDERED COMMERCIAL INVESTMENT? DID YOU KNOW THAT COMMERCIAL DEMAND IS AT AN ALL TIME HIGH?

Some recent research has found that commercial property investment has witnessed a sudden surge in popularity, and this is on both sides of the pond, as both a tenant and an investor. These statistics are based on research that was conducted by RICS.

Tenant/Occupier Demand

The popularity of being a tenant within a commercial property has increased to the highest level since 2021-2022. Up from 10% in the final quarter of last year. Overall it was found that there has been a 14% increase in demand for office space (this finally might indicate that the time of working from home since covid is slowly disappearing and more businesses are looking to move back into office premises and some recovery within the market is taking place).

Surveyors in Scotland are anticipating that rental costs will rise during the next quarter of 2025, and already the rents on commercial properties are the highest they have been for over 10 years.

Investor Demand

In terms of investors looking to purchase commercial properties, Surveyors have reported a sudden increase in enquiries regarding commercial properties, with a 25% increase in enquiries for office space (particularly prime and green offices in Cities such as Edinburgh and Glasgow) and 29% increase in demand for industrial premises – these are massive increases!

Investor Figures

In terms of financial yields, commercial properties do tend to generate higher returns in comparison to residential properties (average yield in Scotland is around 8.2%) which outperforms the rest of the UK. Leases in Scotland are generally a lot longer than those across the rest of the UK.

However, commercial investment is not without risks, in terms of potential economic fluctuations in the future, interest rate sensitivity and general market volatility. And you need to still conduct your research before making any commitment to purchase. Investors in the commercial sector often tend to diversify their portfolio by purchasing different types of commercial space including retail, industrial or office space.

Commercial property also has a good track record for appreciation, and if you have conducted your research, you will find that factors such as infrastructure development and economic growth will mean that your property will rise in value, whilst continuing to provide a long term yield.

There are also tax benefits to holding a commercial property, where investors can deduct expenses such as mortgage interest, and deduct monies for repairs/maintenance, etc. Always make sure you consult a Tax professional before entering into any investments.

Which Way Do You Jump? Leave or Purchase?

Make sure that the decision is right for you as an investor – what are your investment goals? Remember that leasing a commercial property might offer you upfront costs that are lower, but you would miss out on a potential appreciation on the property. If you decide that purchasing is more suited to your financial goals, then this would require a significant investment (and you would need to manage the property) but it has the added bonus of appreciating in value.

Scotland is Booming

Commercial property right across Scotland is now booming. Dundee was recently highlighted as the only ‘UK’ City to receive the UNESCO Cit of Design title after the massive transformation down at the City’s waterfront area, and there is a massive push locally on commercial property development. Remember the best location for commercial property is places and Cities with high foot traffic and good access to rail and transport.

Promising - Although Challenges Ahead

The overall increase in commercial property demand is some welcome news for the market and whilst there might be some challenges ahead with the global economy, the general feeling is that the market is really on the up.

Maybe you are looking for an investment that carries less risk, then why not consider asset backed property investment?

Get in touch with our team for a quick chat!

info@murraypropertyholdings.co.uk

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