Growing numbers of landlords are moving into commercial property amid fears that the residential market is too challenging.
An NRLA poll found that 40% have either bought or are thinking of buying commercial property and of these, more than a third – at 35% – said it was likely to become more important in their portfolio.
A recent report from Winkworth revealed that investors have started buying up shops and offices in London rather than houses to turn a profit. The agent has seen a surge of interest from those looking to boost their pension pots by targeting commercial property in the under £1million market, as more residential landlords sell up due to punitive tax and regulatory changes.
Diversifying portfolios
Diversifying portfolios, due to the impending Renters’ Rights Bill and potential changes in Minimum Energy Efficiency Standards (MEES), suggests some landlords are no longer convinced that conditions are in place for their business in residential property to thrive, agrees the NRLA.
However, according to its survey, more than half – at 55% – of landlords who had considered diversifying into commercial property but not yet done so cited a lack of experience, while a further 36% were concerned about risk versus return.
Chris Norris, of the NRLA, believes many landlords are waiting for the Renters’ Rights Bill to become law before committing to their plans.
“I expect a lot of landlords to be sitting on their hands for the next 12 months, just while the regulations come in, while they find out what MEES looks like,” he said.
“I haven’t seen enough evidence of private landlords moving that way [from residential property to commercial] yet. But commercial property has not been particularly lucrative for the last five to six years.”
The same survey, of more than 1,200 landlords, found a further 15% plan to sell up and leave the market.
