Commercial Property

The UK commercial property market is broadly divided into three main sectors – retail, offices and industrials. All have similar characteristics in that an investment in property provides potential for capital appreciation combined with a regular income achieved through rents received from tenants. Rent is usually received exclusive of rates, insurance and repairs, all of which are paid for by the tenant. Most leases allow upward only rental reviews, giving potential for income growth. UK commercial property leases tend to be long-term, typically lasting ten years or more, providing a high degree of income visibility and security, regardless of market conditions.

Commercial Property

While the potential benefits are compelling, there are a number of risks and other factors that an investor in commercial property needs to consider.


Commercial property is a relatively illiquid investment. Unlike other major asset classes, property is not sold on a central exchange and completing a purchase or sale of a property is a lengthy process. Property investments tend to be unique in terms of factors such as size, features, location and condition. Opportunities to buy individual properties are dependent upon both supply and available sellers.


The costs incurred in buying or selling property are relatively high, with legal fees and tax adding to the high transaction costs. Owners of leasehold property may also have to pay ground rent to the freeholder.

Management and Maintenance

Actively managing commercial property requires specialist skills. In addition to managing tenants, commercial properties need to be maintained to an acceptable standard in order to preserve their capital values. This is likely to involve regular refurbishment and possibly adapting the building for change of use. However, building renovation and improvements is one key way in which property managers can add value to their investments.

Economic Influences

Commercial property is a cyclical market and influenced by the different stages of the economic cycle. Given the time required to complete new developments, there is the risk that the economy takes a significant downturn before new projects come to fruition.


There are no daily listings of market prices for properties, merely expert opinions as to the likely value of certain standardised types of property. The Investment Property Databank does, however, provide a comprehensive database of institutional property, including property details, transaction prices and valuations

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