With the rising economy, people have sort various ways of bringing in income to cater for their livelihood. Commercial Property London has rapidly multiplied over the recent years. Commercial property is any land or building zoned to generate a profit either from capital gain, or rental income. Such property can be directly or indirectly used to generate positive financial returns.
Types of Commercial Properties
These properties can be classified into five:
Retail
Commercial properties used for retail may include, restaurants, shopping malls, single-tenant store and grocery stores. Retail properties are properties used for selling goods and services directly to the buyers.
Office
These properties are where businesses take place but are not visited by majority of the customers. Most sell the items online or in catalogs, but operate from office spaces.
Industrial
These properties are used for companies that make or store things on a massive scale. Industrial properties may include warehouses and junkyards.
Multi-family
These are properties used for residential commercial purposes such as flats, and garden apartments.
Miscellaneous
Such properties are used for leisure purposes like, theatres and bowling alleys, health care purposes like, hospitals, special-purpose properties such as cemeteries, schools and libraries.
Commercial Property London has its largest share of property under office, closely followed by retail and then the industrial. There has been a spike in the number of overseas investors who were established as the largest participants in the property investment market.
Drivers of Property Returns
Demand and supply
The rent at which a property will let or the price at which it will sell is determined by the market. The higher the demand of a commercial property, the higher the selling price or rent rate.
Leases and asset management
These include rent reviews, lease length, covenant strength and asset management. Rent reviews are conducted every five years and set to market level where it is above or equal to the rent being paid at the time of review. Lease lengths vary from sector to sector but are averaged at seven years. Asset management is simply rent collection, administration of contractual lease terms, arrangement and recovery of insurance and provision of services and maintenance.
Leverage
Leverage/gearing can be used to increase the return on equity during an upward or stable market. Conversely, leverage can worsen negative returns in a falling market.
In conclusion, commercial property is subjected to different tax and financial rules, as well as additional legal requirements and prohibitions.