A beginner’s guide to investing in commercial property

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The commercial property market comprises of offices, shops and industrial buildings like warehouses. Currently, investment in commercial property is at an all-time high here in Britain. What mainly attracts investors in this market is that commercial property investment forms an income source that is both steady and safe. Prior to 2007, the commercial property market was on a downward spiral. This was marked by an unprecedented fall in price levels of up to 44%. The situation has long been improved and the market is steadily growing.

In order for one to succeed in this market, a basic understanding of the involved complex market factors, the potential risks and the number of property management options available is required. Understanding all these aspects will give a dependable basis when selecting the commercial property that will bring the most success, being either industrial, retail or office. For starters, the following considerations equally apply to small and large commercial property and will assist in identifying suitable opportunities and locations for investment.

Understand the liquid, volatility and the diversification of the commercial property
Some commercial property is very liquid and can be easily converted to cash. It is highly advisable to invest in commercial property that is volatile and highly liquid because such property is easy to sell in case the market takes a downward trend.

Have an understanding of the market’s drivers
The major driving force in commercial property is demand. Demand is a factor of interest rates, infrastructural development, demographics, population growth and retail spending. Always invest in commercial property which is experiencing high demand levels.

Know and understand the risks involved
When a commercial investment property is well researched, it can be very lucrative. However, being aware of the risks likely to be faced in advance enables the investor to be prepared fully for every adverse circumstance likely to be experienced.

Have a reliable source of finance

Compared to normal residential funding, financing in commercial property is more complicated. As such, you need to have a financier who is a specialist in commercial property finance. It is also worth noting that compared to funds that have been invested in other assets, commercial property funds could be a little more expensive.

Small new (commonly referred to as “off the plan”) warehouses or commercial suites in areas with high demand pose low risk options to commercial property investors. These are a great option for starters to invest in.

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