Residential landlords eye opportunities to shift into commercial property

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In the midst of economic volatility and uncertainty within the property market, landlords are looking for ways to diversify their properties and adapt their strategies in order to future-proof their portfolios. More than a third (37%) of landlords who are planning to invest in commercial property cited diversification as the key reason for doing so.

Those who already own commercial properties are also planning to expand further, with 35% of landlords with commercial assets stating that they are looking to invest in more in the near future. Those with larger portfolios are more likely to have already invested in the commercial space, though they are far from the only investors recognising the potential. 36% of all landlords said that they have noticed the increase in demand for commercial property and view it as a good investment opportunity. In addition, a quarter of landlords believe there is currently a lack of good quality properties for businesses, indicating a possible need for development or conversion work.

Many landlords see the opportunity to branch into commercial property as a chance to support their local community (29%), with many planning to invest in small (33%) and large (30%) retail space. As our high streets change shape with more of a focus on local, independent, and experiential stores, landlords have the opportunity to play a role in the revival of the high street and boost our town centres across the UK. With hybrid working, more workers are outside of cities during the working week, meaning more opportunities for smaller businesses in towns and village centres.

Hybrid working has also prompted a re-evaluation of our office needs, with many businesses looking for spaces that support the new ways of working. Demand for office space has increased according to recent data from Rightmove, and research from IWG found that half of businesses have opened offices and workspaces outside of city centres. This has sparked landlords’ in this type of commercial investment (36%). Other types of investment that landlords are interested in diversifying into include:

• Industrial or manufacturing space – 28%
• Factories or distribution space – 28%

_{Survey was carried out by Censuswide, surveying 1,012 UK landlords ages 18+ between 25th and 31st August 2023.}

Emma Cox, Managing Director of Real Estate at Shawbrook, said:

“Fluctuating prices and high borrowing costs are hampering confidence in the residential property sector.

“As a result, landlords are looking for other ways to diversify their portfolios and cater for current demand. The increase in workers returning to offices and the evolution of local highstreets are two examples of areas where landlords will be seeking opportunities to invest, and those who already own commercial properties will be looking to add more. Landlords could become the unsung heroes of the high street, with many planning to support their local communities by injecting new life into commercial properties and retail units.

“Commercial property is certainly a good prospect for those who have typically specialised in the residential market and are looking to adapt their strategies now or in the near future.”