Propertymark is pointing to fewer tax and legal “strangleholds” to explain why investors are switching from residential to commercial property.

Increasing tax, regulatory and compliance obligations are prompting some residential landlords to reassess their portfolios and consider commercial assets.

The legislative framework covering commercial property is often viewed as less restrictive.

Transition away

So, while commercial property presents its own challenges, including higher entry costs and more complex transactions, advisers are seeing increased enquiries from investors seeking to transition away from residential investment.

Indeed, commercial agents are reporting more enquiries from investors, Propertymark suggests.

Interest seems to be building from investors wanting to invest in commercial property over residential.”

Michael Sears, member of the NAEA Commercial Propertymark Advisory Panel, says: “Interest seems to be building from investors wanting to invest in commercial property over residential, mainly because there is less of a legislative stranglehold.

“Investors tend to often be those converting their residential portfolios to commercial as the entry barrier financially to commercial is generally higher, with lower loan-to-value lending typically available.”

Pivoting

Steve Lane, also a member of the panel, adds: “An interesting market trend is that we are seeing fresh investors seeking more in-depth advice where they are considering pivoting and perhaps investing in commercial property rather than residential property due to the changes in the private rental sector.

“Many of these investors need guidance on the differences between the tax and regulatory structures of the two markets. This includes borrowing ratios, tax liabilities, and regulatory obligations.”

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