5 challenges facing commercial property investors

31 October 2018

Despite the uncertainty that Brexit brings, there are still many opportunities for investors. These are the key issues we see facing the real estate market – and what should be considered when deciding the type of property to invest in.

  1. Supply vs demand for office space

Take-up of affordable office space is soaring. With the development of prime locations in many cities, there are good opportunities for investors all over the country.

Demand for office space in Central London is among the highest, with leasing activity in 2017 reaching 31% above average.

But demand is also strong in Manchester and Liverpool, due to a growth in the technology, media and telecoms sectors there. Many start-ups are going north as they look for value outside London.

  1. Decline in retail space

The rise in internet shopping and a shift away from the high street has left the future of retail property uncertain.

This, however, is catalysing growth in the industrial warehouses sector. Packaging space is vital for fast online deliveries and there is now fierce competition for large sites near nationwide supply lines.

The latest figures from the RICS estimate that rental growth for industrial space could reach as high as 35%.

  1. Risks of modern construction methods

Today, new builds are often composed of a range of modern materials. While brick, steel and concrete are still the dominant components of most buildings, it is not rare to find insulated panels, recycled plastic and glass playing key, even structural roles.

These modern methods of construction can have environmental benefits and are cost-effective as they speed up the construction process. However, with new construction methods come new risks. Fire is perhaps the greatest potential risk, and it is also unclear how new builds will stand up to extreme weather and age.

  1. Empty units and rent shortfalls

The rush to invest in property after the financial crash coupled with the rise of telecommuting and the gig economy has left many units unoccupied.

These buildings present a number of risks. They may fall into disrepair, attract unwelcome visitors and wildlife, or be targeted by vandals and arsonists. This can cause insurance premiums to skyrocket, which is why anyone managing empty real estate should seek a risk assessment at the earliest opportunity.

Another potential problem is a lack of interest from tenants or potential buyers. This can leave a hole in an investor’s pocket as they’ll still be responsible for paying business rates.

  1. Political instability

Since Britain voted to leave the EU in June 2016, the political and economic outlook has been uncertain. Consequently, many investors have taken a reluctant approach to risk.

But despite the politics, lending growth, new capital and the global economic recovery have seen sustained growth, suggesting the commercial property market has a positive future.


How can NIG help?

We’re up to date with the latest commercial property trends and can assist you with helping your clients insure their properties. We have a broad range of property products which can cater for the needs of Commercial Property Owners, small or large.

For smaller risks we offer Property Owners available via our award-winning online trading platform, TheHub. For larger risks we offer Essential Property Owners which is traded via our regional offices. 

Our in-house team of 19 surveyors based around the country can also prove invaluable when it comes to assessing your property risks.

To find out more about how NIG can help you, please contact our team.


List of sources:

https://www.knightfrank.co.uk/blog/2018/02/07/future-demand-for-office-space-in-the-capital-the-sectors-to-watch

https://www.rics.org/globalassets/rics-website/media/knowledge/research/market-surveys/uk-commercial-property-market-survey-q2-2018-rics.pdf


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