Property investors who have considered dabbling in the commercial real estate sector might be tempted to finally do so due to falling prices.
This could be the ideal time to get on the commercial property ladder thanks to the opportunity at the moment to purchase units at a low price. This is according to Max King, writing for MoneyWeek, who noted that the uncertainty surrounding the UK economy has affected the property industry.
He stated that All Share Index returned one per cent for the year ending July 2019 and 27 per cent for three years. However, FTSE Real Estate’s returns came in at 10.6 per cent and 4.5 per cent for the respective periods.
“Some of this reflects the well-known problems of the retail sector; historic overexpansion, excessive rents, business rates, online competition, and the use of creditor voluntary arrangements (CVAs) by distressed retailers to cut their rental costs and break contracts,” Mr King stated.
However, the impending issue of Brexit has also negatively impacted the market, particularly as the UK has been unable to strike a deal with the European Union (EU) everyone can agree on.
Indeed, Britain was meant to leave the EU at the end of March; however, failing to negotiate a strategy meant Brexit was given a six-month extension until October 31st.
TR Property Investment Trust’s March Phayre-Mudge told the news provider that Brexit added an “additional level of risk” for property investors due to the market accepting “the real possibility of no-deal”.
Those who have been considering buying commercial real estate and are attracted by falling prices have been reassured about the risk to their potential investment.
Mr Phayre-Mudge added: “Investment volumes in the City are at ten-year highs, with the occupational market, especially the technology and media sectors, happy to pay up for quality office space.”
He went on to say: “We are utterly confident of the industrial, logistics, healthcare, student accommodation and self-storage sectors.”
In fact, the Royal Institution of Chartered Surveyors (Rics) recently released its Q2 2019: UK Commercial Property Market Survey, which revealed 68 per cent of surveyors could not provide evidence that companies are relocating from the UK as a result of Brexit.
In addition to this, the survey found demand for commercial property continues to grow in the industrial sector.
Therefore, respondents predict “further solid growth in capital values across the prime industrial and office sectors”. Investors looking to purchase real estate in the East Midlands to add to their investment portfolio are likely to benefit the most, with the report revealing this region offered the highest expectations for capital value increases over the year.
Those who manage to buy commercial property for a bargain price might need to update the unit to make it more attractive to occupiers or customers. In this case, you should consider on-site spray painting, as this will bring the property up to date, and make it look far more appealing to potential tenants or clientele.