A recent research study by Shawbrook reveals that 19% of landlords are contemplating diversifying into the commercial property sector amidst economic uncertainty and shifting property market conditions. Diversification appears to be the primary motivator for this interest, cited by 37% of landlords planning to make such an investment.
The research further highlights that 35% of landlords who already have commercial assets are planning to expand their holdings. Large portfolio owners are particularly likely to have invested in commercial properties, but they are not the only ones recognizing the lucrative potential. In fact, 36% of all landlords surveyed noted an increase in demand for commercial properties, identifying them as worthwhile investment opportunities.
The study also identifies a perceived gap in the market for high-quality commercial properties. A quarter of landlords indicated that there is a current shortage of such spaces, pointing to potential opportunities for development or conversion projects.
Many landlords see investing in commercial property as more than just a financial opportunity; nearly a third (29%) view it as a chance to contribute positively to their local communities. Given the changing dynamics of high streets and town centres, which are increasingly focusing on local, independent, and experiential stores, landlords could play a significant role in revitalising these areas. The trend towards hybrid working is also influencing this shift, as more workers spend weekdays outside of cities, creating more opportunities for businesses in towns and village centres.
This new mode of working is also affecting the demand for office spaces. Recent data from Rightmove and research from IWG indicate an increased need for offices that align with hybrid working models. Half of the businesses surveyed have already opened offices outside of city centres, drawing 36% of landlords into considering this type of commercial investment. Other sectors attracting landlord interest include industrial or manufacturing spaces and factories or distribution spaces, each pulling in 28% of landlords surveyed.
Emma Cox, MD of Real Estate at Shawbrook, commented on the findings, stating: “Fluctuating prices and high borrowing costs are hampering confidence in the residential property sector. As a result, landlords are diversifying their portfolios to cater for current demand. The increase in workers returning to offices and the transformation of local high streets offer key areas of investment opportunity. Landlords could become the unsung heroes of the high street by supporting their local communities through fresh investment in commercial properties and retail units.”
Cox concluded that “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.”
