Commercial property remains a good investment opportunity – Aldermore

A lot of investors are looking for income while reducing the risk of their strategies at the same time, and real estate still offers some good opportunities despite the uncertainty about capital growth.

Value-adding strategies such as refurbishment and development are getting in favour with investors in commercial property. When selecting a property, investors will increasingly turn their attention to rental growth and income return figures. And according to the latest CBRE Monthly Index, rents across the UK grew by 0.2% in June, in line with the trend for the year. Occupier demand has remained high across the country. The industrial sector in particular showed strong growth with rents increasing by 0.4% in June but also the office and retail sector showed positive growth figures.

Uncertainty did not affect rents in the six-month period ahead of the referendum and as the CBRE stated, total returns of 0.6% for the month matched returns seen in almost every month of the year to date. Savills forecast that the asset class would return 7.5% in 2016, and are now predicting that many may see areas like London as great buyer opportunities.

Commercial property investors are likely to become more forensic when choosing projects over the rest of the year, but the underlying fundamentals of the commercial property market, providing both capital security alongside rental income, still make commercial property a strong investment. Now is a great opportunity for buyers to take stock of changing market patterns, whether it is the effect on retail tenants of fewer high street shoppers or the potential for semi-commercial property in future, and make plans for a long-term investment that delivers enduring value.

Commercial mortgages rely so much on choosing the right deal, whether it is office space in the right part of town, or making sure you have a suitable retail tenant that can provide a secure rental income.

In the next few days the CBRE will publish their July monthly index and we will have a clearer idea of the direction capital values and rents will take in the second half of the year, and a sense of what the pace will be in the remained of 2016. Month-by-month data can often be volatile, but UK retail property has long been a secure investment and should continue to be in future.