Investors shift from residential to commercial property amid regulatory burden

Investors are turning to commercial property rather than residential property due to government regulation, claims an industry body.

According to NAEA Commercial Propertymark’s Advisory Panel, increasing taxes and regulations are prompting investors to consider commercial property.

The news comes as the Renters’ Rights Act came into force in the private rented sector on 1 May 2026.

Less of a legislative stranglehold

Steve Lane, member of the NAEA Commercial Propertymark Commercial Advisory Panel, said: “An interesting market trend is that we are seeing fresh investors seeking more in-depth advice where they are considering pivoting and perhaps investing in commercial property rather than residential property due to the changes in the private rental sector.

“Many of these investors need guidance on the differences between the tax and regulatory structures of the two markets. This includes borrowing ratios, tax liabilities, and regulatory obligations.”

Michael Sears, member of the NAEA Commercial Propertymark Advisory Panel, added: “Interest seems to be building from investors wanting to invest in commercial property over residential, mainly because there is less of a legislative stranglehold.

“Investors tend to often be those converting their residential portfolios to commercial as the entry barrier financially to commercial is generally higher, with lower loan-to-value lending typically available.”

Activity in retail market

The data also reveals that large open-plan offices continue to struggle, although both supply and demand remain low. Smaller offices in business centres, however, continue to perform well.

While demand from larger national retailers remains subdued, independent operators continue to drive activity in the retail market.

The government has announced that privately rented non-domestic properties of more than 1,000 square metres in England and Wales will need to achieve an EPC rating of C, where this is deemed cost-effective.

For smaller commercial buildings under 1,000 square metres, the government has confirmed they will remain subject to the current minimum EPC E requirement.