More and more investors are being attracted to the commercial sector due to higher yields, according to the Commercial Property Trust (UKCPT).
As further property owners aim to tie their assets in bricks, investors have recently been hesitant in recent years due to fund values dramatically falling since the global financial crisis hit in 2007.
Furthermore, sector confidence has fallen, leaving much office space in large cities empty; so much so that the government is aiming to convert many of these blocks into residential spaces, without any planning permission needed. According to the Financial Times, ten per cent of offices, shops and factories are empty across the UK.
With a slow recovery, it does seem that trends are on the rise however. The UKCPT has managed the upwards shift by two speed levels; one looking at London and the south east of England, which has seen nice returns, and the other looking at the rest of the country slugging around.
In a new report by the UKCPT, it has emerged that yields within the market now stand at an average of 7.1 per cent, whilst share demand has meant that prices have increased to an eight per cent premium beyond the basic property value. UKCPT itself aims to buy properties that will offer at least a six per cent return.
Trust manager Robert Boag of Ignis Asset Management said: "We have an annual business plan for each property and if we don’t think it can generate the income we require, we are not afraid to sell a well-let property."
Industrial experts have suggested that for those who do not want to play it too risky, secondary properties such as cinemas and student accommodation are always a good bet. It is important to note however that many commercial leases will be very long.