Investing in commercial property is an important consideration for many investors. It’s a great way of diversifying or spreading the risk in an investment portfolio, especially when this property isn’t highly linked with other assets such as equities, fixed income and cash. Industrial Units to Let could be your answer to great profits.
The Benefits of Investing in Commercial Properties
Compared to the U.S. and Europe, the U.K. benefits from a longer lease structure. For example, in London, the typical lease length is around 10 to 15 years, while across the rest of the U.K., the lease length is approximately 8 years.
This is substantially longer than what you’d get from a residential property, as these normally have lease lengths that vary from six months to a year.
In essence, this structure provides you with more security due to the returns that are provided by the shares you have invested. For a longer period of time, you have a guaranteed income, and this is a welcome relief for many landlords!
The Ways You Can Invest in Commercial Properties
To gain the benefits of investing in commercial properties, there are a number of different avenues available.
Direct investments will mean you buy industrial units to let from companies such as LCP Properties. This means you buy some of, or all of, the shares in this commercial building. However, as some commercial properties can cost a lot of money, this isn’t always the easiest option for some investors.
Therefore, they may look at direct commercial property funds. These are also known as ‘bricks-and-mortars funds’ and are a much more common way of investing in these types of properties. They use a collective investment scheme, which invests directly into a certain portfolio of commercial units, such as retail spaces or industrial warehouses.
Alternatively, there are indirect property funds. Again, these are collective investment schemes, but these offer shares in property companies that are recorded on the stock market. Compared to direct investments in property, you won’t get the same benefits of diversification, because the shares in these properties can move up and down according to the stock markets.
Whatever your investment route is, there are two ways you can earn money from commercial properties. Firstly, you can gain income from the rent your tenant(s) pay, and you can also gain capital growth if the unit you’ve invested in goes up in value.
Despite many investors liking the familiarity of investing in residential properties, a lot are now seeing the advantages commercial properties provide them with. With longer lease terms, less hassle from tenants and various different investment options available, commercial properties can offer landlords a much more cost-effective and simple solution to their property portfolio.