We have been watching the commercial property market. Recently conversations have come to a swift halt. There’s plenty of doubt and uncertainty in the business, post-Brexit. But there is hope, for sure.
In fact, I saw a brilliant cartoon this morning. It showed a ‘UK’ cat pawing to be let out. An ‘EU’ owner stood at the exit and opened the door. The cat didn’t move. Yes, this says just as much about feline contrariness as anything. But this behaviour is underpinning doubt and not helping us all move on and up.
Are there really black clouds hanging over the commercial property market in London?
As Jonathan Ford reported in his FT article, UK real estate company share prices have dipped by 15%. We have seen property funds, and large players at that, also suspending redemptions. So no, despite the weather forecast of late, there are some very black clouds building.
Yet life in the commercial property market does go on.
We cannot shut up shop and hope that someone will resolve the bigger commercial property and impending financial problems. It’s never going to be a clean sweep. Nothing is going to improve immediately. Yet what we do now, in times of potential crisis, is what will make the difference in the long term.
So if you are thinking why you should invest in property as an asset class, here are a few reasons to be going along with.
5 good reasons why Commercial Property is still worth your investment
- UK retail property has always represented a pretty secure value store. Yes, there have been times when have seen some volatile periods but in the main it’s a safe bet for many.
- If you look at the broader context we find ourselves operating within, what else would you invest in right now? You may find that the long-term gains will be worth the wait. Yes we are in for a bumpy ride but property always remains a worthwhile asset.
- Look at it this way, property always retains residual value and you are unlikely to lose everything in the event of a crash unlike other types of investment.
- Look at past performance; there was a 7.9% annualised total return over a 15-year period up until 2015. Take into account the 2008 crash occurred within this period you can see that long term, commercial property is consistent.
- Retail commercial property has seen quite a high even though rents have not been particularly buoyant of late. Even though the big UK chain stores have been struggling to cope with their Internet shopping rival real estate values have continued to grow. In fact they were up by around 11% since 2011. Although we have seen both BHS and Austin Reed collapse there is plenty of scope for new retailers that are ready to embrace a different style of shopping that combines face to face old fashioned personal service with the excitement of digital services.
On the other hand if you are looking for a more diverse portfolio then commercial property is a valuable asset in this instance. As Simon Durkin,Head of Research at BNP Paribas Real Estate, says:
“Diversification can bring additional benefits when a portfolio includes assets in different sectors and geographic locations. The more diverse a portfolio is – the lesser the risk.”
Therefore commercial real estate can give the equivalent of a bond’s security but with the added bonus of what Jonathan Ford states is ‘an equity-like kick from the rent.’ However, “Greater uncertainty spells less leverage and more discrimination.”
For more commentary from Jonathan look at his articles on commercial property in the Financial Times.
Being commercial property specialists and with masses of experience in the D1 property sector we know how churches, especially, are looking for commercial properties to convert into places of worship. If making your commercial property work harder appeals to you in 2016/17 then why not contact Tunj Adebayo and talk about how we can help match your property with an organisation that needs such accommodation.Tags: commercial property