Growing trend of landlords investing in semi-commercial property

Landlords wanting higher yields are increasingly looking towards semi-commercial properties for investment, research reveals.

Shawbrook Bank says that applications for new purchases are nearly double this year compared with 2023.

Using its internal data, applications for semi-commercial properties reached 24% in the first half of 2024, up from just 13% in all of 2023.

Shawbrook says the trend is down to a more stable market, allowing investors to diversify their portfolios with assets that offer higher rental yields.

Investors are adapting to a higher interest rate environment

The bank’s director of real estate proposition, Daryl Norkett, said: “Property investors are adapting to a higher interest rate environment with portfolio landlords taking the opportunity to grow their businesses with a wider range of assets.

“We’re already seeing this in the applications we’ve been receiving recently, with investors looking towards property types like HMOs, social housing and semi-commercial properties that tend to offer higher rental yields than traditional single lets.”

He added: “These opportunities are property specific but can be very attractive to investors.

“Semi-commercial properties in particular have the added benefit of having both commercial and residential space, meaning that landlords can enjoy higher yields with a mix of income streams.”

South East sees most interest

The South East of England has seen a particularly strong surge in interest, with nearly two-fifths (39%) of applications this year targeting the region compared to a quarter (27%) in 2023.

Data also reveals that retail spaces with flats above are the most popular type of semi-commercial property, attracting 60% of investor interest.

These properties often hold additional value generation potential through permitted development rights for adding further residential units.