Almas Uddin
Founder and Mortgage Advisor
18 Dec 2022
The commercial property market is somewhat different from its residential cousin and has seen considerable increases in a post-pandemic climate that outstrip previous average demand levels.
Here at Revolution Finance Brokers, we wanted to pinpoint which specific parts of the commercial property market offer the best investment opportunities in terms of regions, sectors and property types.
Demand for Commercial Rental Property by Industry
Our methodology was to evaluate the five main sectors and see what proportion of commercial rental property listings had been successfully let in each.
The stats have narrow margins, with between 20% and 25% of all business lets on the UK market already let to a new tenant.
While the last couple of years has been significantly challenging for retail companies, overall, around 26% of every available commercial space has been snagged by a new tenant or has a lease agreement in place.
The highest demand is in London, with 39% of available retail rental units filled, and demand exceeding the 30% baseline level in East England and the South East, with filled tenancies accounting for 32% and 31% of property market stock.
Hospitality and leisure also faced trading challenges over the pandemic but seem to have begun to recover quickly, with 23% of commercial rentals let out.
Commercial rental properties suited for retail and leisure are in the highest demand in South West and East England.
Availability of Commercial Property Lets for Industrial and Warehousing Businesses
Within the previous 24 months, interest in renting warehouses or industrial units skyrocketed as so many retailers opted for online sales strategies or allowed customers to order products for home delivery while stores were shut.
A little of this trend has now scaled back, but the appetite for these rental premises remains the third largest in the commercial property rental industry, with the East Midlands and East England seeing the highest demand.
Development land for commercial projects is also performing well, with 41% of rental capacity full and a 21% average demand in London alone, due to a scarcity of suitable development space.
The sector bucking the trend is office work, as many organisations have adopted a remote working policy, which means office spaces are the least lucrative investment, with just 7% of available units let out.
Interest in renting office space is slightly higher in East England and the West Midlands at 17%, and 10% filled tenancies respectively, followed by the South West.
Choosing the Right Commercial Property Investment
There are multiple factors to consider when deciding what sort of rental property to invest in, from the total cost of the purchase, rental yields, potential vacant periods and demand levels in your region.
Demand is pivotal because even an exceptional quality commercial rental premise will not return a profit if there simply aren't sufficient tenants.
Knowing what types of property to buy and where is essential for investors looking for long-term property acquisitions. In a post-pandemic world, the number one property in terms of demand has certainly switched from office space to other rental units.
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