Insights 2min(s)

A guide to local commercial property investments

Man In Apron Putting Nameplate On The Entrance Door

By Daryl Norkett, Director of Real Estate Proposition

If I were a property investor today, I'd have my eyes set on the opportunities in retail property investment. I'm not talking about the bustling city centres that typically come to mind. Instead, I'd be looking at retail spaces away from the large city centres. Why? Well, the world is changing, and so are the dynamics of property investment. Let me explain why these commercial real estate gems on the outskirts are worth considering, especially as more people are working from home. 

In recent years - and turbo boosted by the pandemic - we've witnessed a shift in the way we live and work. The rise of remote work has allowed many people to enjoy the convenience of working from the comfort of their homes. But with this shift, something interesting is happening. People are rediscovering the charm of their local high streets. They're exploring their neighbourhoods and making use of the amenities right at their doorstep.

Local high streets are becoming vibrant hubs once again. Hairdressers, optometrists, sandwich shops, coffee houses, and gift shops are catering to the needs and desires of the community. This revival of well positioned local businesses presents an opportunity for commercial property investors.

Investing in retail commercial real estate offers several distinct advantages. Firstly, it provides a stable and potentially lucrative income stream, often through long-term lease agreements. Retail properties are also typically centrally located in high-visibility areas to attract footfall. Additionally, commercial leases often come with triple-net (NNN) terms, where tenants cover property taxes, insurance, and maintenance costs, relieving the landlord of these responsibilities.

Some retail properties can be resilient during economic downturns, as essential businesses tend to be ‘evergreen’ even in challenging times – we saw this during the lockdowns of 2020 and 2021. In many cases, rental yields from these properties are much higher when compared to traditional Buy-to-Let (BTL) investments.

As our high streets evolve, retail properties positioned in mixed use areas are being partly converted to residential homes – often either above or to the rear of the existing shop unit. The expansion of permitted development rights and the introduction of planning class ‘E’ has supported this trend. The financial returns can be attractive to investors whilst providing much needed supply of residential rental properties from otherwise under-utilised spaces.

The retail sector is varied and the specific location of the property is often critically important to future demand. Investing in the sector requires careful research to be carried out to identify those opportunities.

It’s not just about the numbers though, there's also an undeniable charm to investing in properties that contribute to the fabric of the community. It's not just about numbers; it's about becoming a part of a neighbourhood’s resurgence. As someone considering property investment, that's an exciting prospect.

So, if you're considering your next retail property investment, don't forget to explore the potentially hidden gems on your own doorstep.