Published On: Tue, Jan 26th, 2016

A guide to Investing in Commercial Property in 2016

According to the latest forecast from global real estate advisor CBRE, the next 12 months is set to be another strong year for investors in the UK’s commercial property sector. 2015 marked a record year and 2016 looks set to continue this trend with a further £70 billion expected to be invested. If you’re new to the market, advice from experts like GVA Worldwide could be what you need to get started. You should know that there are three key sectors to be aware of—offices, retail, and industrial—each of which have their own advantages and disadvantages in the current climate.

Commercial Property in 2016

Offices

Offices are perhaps the first kind of commercial property people think of, but it’s a difficult market and can be easy to make bad decisions. This is because properties are often sold in large lots, which means they’re often too expensive for individual buyers who aren’t back by some kind of external capital. Despite the advent of the internet and the growing trend of working from home, there is still demand for offices though. Tech giants Google plan to finally open their new 800,000 sq ft campus in London this year, and Yahoo even banned working from home in an effort to improve collaboration between its employees.

Retail

Retail can seem like a particularly attractive property investment right now, as shops can be purchased for very low fees, especially in the north of the country. However, while it may seem like a good entry point into the commercial property market, it’s worth remembering that the recession has hit the retail sector hard. In fact, with as many as one in three high street shops estimated to be empty. Similarly, consumer habits have changed rapidly over the past several years, as more and more people are comfortably buying goods online. This being said, there are still good opportunities for those able to spot a unique gap in the market, but it’s a risky strategy.

Industrial

Finally, investing in industrial buildings—such as warehouses—may be more lucrative for first-time buyers. According to a report from Savills, the overall transaction volume for the first three quarters of 2014 reached £2 billion, 50% up on the same period last year which totalled £1.1 billion. This trend continued into 2015, with 29 transactions in the first quarter of the year alone totalling £675m. Small units between 500-1,500 sq. ft. are often seen as a good starting point, as the demand is still there, particularly close to major cities, which will result in strong returns and easy lets.