What is the office sector?
As the name suggests, this category includes small professional offices, business parks, standard offices, city skyscrapers and everything else in between.
Why should I invest?
The majority of investors have prioritised residential properties over the years due to the ever-increasing demand, upward trend in prices and the fact that residential properties returned to their pre-crisis peak faster than the commercial sector.
However, the demand for office space has been rising steadily since the economic crisis of 2008 and as the demand grows business owners are looking for well-equipped and modern spaces.
Not surprisingly, London and the South East have the highest concentration of prime spaces. However, the trend is also spreading to other regions.
Investors looking for new commercial property opportunities should consider the investing in the office sector.
Many investors are anxious about fluctuation in the office sector due to political uncertainty and the Brexit vote. However, the biggest office markets in the UK have continued to record high leasing activity according to What Investment.
How can I invest in the office sector?
You can invest in the office sector in a number of ways. You can buy office space directly and earn a generous rental income.
Or you can invest through commercial property funds. These funds allow members of the public to invest in larger commercial properties such as office blocks, that would usually only attract investment from professionals.
This option could be an option for investors who encounter barriers to entry such as lot size and illiquidity.
If you are buying office space, consider:
Buy more space than you need, allowing for any expansion. If you can't fill it up, you can always lease vacant space to a tenant, offering yourself an additional revenue stream.
Location is important to make sure you are close to your clients, or if you are leasing it out, to a solid customer base for your tenants. Employees will also need to have access so consider nearby transport links.
If you are wanting to sell on the office space quickly, look at lower-budget locations but consider your future business plans.
Make sure you have a chartered surveyor checking that the office is in tip-top condition before you sign anything.
Consider logistics such as proper lighting, power sockets, access to broadband, and full security systems.
Things to consider
If you are leasing, look for the longest lease and ask yourself questions like:
How flexible will the lease be?
Can you cut it short?
Will the rent change at any time?
How will this affect you financially?
How will the rent be paid?
Find out exactly who is responsible for maintenance in the office by looking carefully on the lease. Unlike residential, where the landlord is solely responsible, it is much more of a grey area with office space. Generally, landlords will be responsible for structural and exterior changes, whilst tenants will take care of the interior.
Under the Landlord and Tenant Act 1954, all commercial leases over six months long will be protected, so a landlord must give enough notice before ending a lease.