Should we reinvest in commercial property?
Hello, we need some advice on commercial investment, please.
We are in the process of selling a long-held residential property and would appreciate the guidance of someone who knows the ins and outs of commercial property.
We are based in North Hampshire and we have seen advertised industrial units on an established local industrial estate that we can afford, and need to know what to look out for and what we need to know.
Is commercial property, particularly industrial, worth the move from residential?
What are the pros and cons you’ve experienced as a commercial property investor?
Have you been there, done it and can share your story, please?
Your thoughts will be much appreciated.
Thank you.
Mark
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Landlord thwarts £17,000 tenant rent repayment claim
Member Since January 2016 - Comments: 473
10:38 AM, 21st May 2025, About 11 months ago
Pros:
FRI lease means tenant is responsible for broken windows and toilets.
Easier to evict non-paying tenant with CRAR process.
Generally a more passive & predictable investment.
Once rented out, net rent is virtually gross rent but see CONS below.
Longer Lease, typically 5 years these days
Contract is virtually what you and tenant negotiate, much less statutory boilerplating. Our ASTs are 2 or 3 pages, our commercial lease was 50+ pages and you should have a solicitor draft it.
Contract is seen by courts as between knowledgeable adults or companies as opposed to ASTs where tenants are deemed a vulnerable protected class.
Ability to buy through pension
Cons
Compared to a BTL mortgage, you can’t borrow as cheaply, for as long or as high a LTV – typically, 60-65% for 5 years. If property is downvalued you could have to pay down part of the loan to keep the LTV consistent.
Some loans are repay-on-demand so watch out for that clause and avoid.
Longer voids between lets. A 6 month rent free period is fairly common (around my way at least) to allow the tenant to get their business up and running.
Empty commercial properties can be expensive to hold because of Rates (about half what you would charge as rent typically) and higher utility costs.
Forthcoming EPC requirements maybe C by 2028 and B by 2030 (link below). If you have an uninsulated asbestos roofed single brick construction warehouse with a drafty up and over roller shutter it could be extremely expensive to be compliant. Perhaps get the EPC done just before 2028 once let to give 10 years’ grace.
A bit harder to gauge demand and find tenants. Commercial agent will do this for you.
https://www.vest.energy/blog/epc-regulations
Member Since October 2022 - Comments: 21
10:55 AM, 21st May 2025, About 11 months ago
Try watching Touchstone video’s on utube its all free info. Also Paul Smith and Abby Hookway.
Member Since June 2017 - Comments: 10
1:30 PM, 21st May 2025, About 11 months ago
Reply to the comment left by Darren Peters at 21/05/2025 – 10:38
I thank you for taking the time to respond.
It’s much appreciated
Member Since June 2017 - Comments: 10
1:31 PM, 21st May 2025, About 11 months ago
Reply to the comment left by Rich Robson at 21/05/2025 – 10:55
Thank you Rich
Member Since February 2022 - Comments: 206
5:21 PM, 21st May 2025, About 11 months ago
Reply to the comment left by Rich Robson at 21/05/2025 – 10:55
I can recommend Touchstone. I’m moving towards commercial also good luck!