United Kingdom is one of the better commercial real estate markets in the world, considering today’s trend of the declining property value. Here’s why:
- Rent prices are increasing by up to 4% in some parts of England and Wales.
- The property market is indeed doing fairly well, if we look at the latest figures published by Halifax revealing that property prices were up by 10% y-o-y in 2015.
It would appear that unlike in the majority of the rest of the world, the British property market is for now immune from price meltdown but, according to recent reports, this might not last.
The state of the property market in the UK
Many experts feel that this British property bubble will not be sustainable as global stock markets keep on falling.
The bubble has kept growing also because the government’s upcoming ‘landlord’ tax coming into action later this year in April, has had a huge impact on sales. This is mostly because buy-to-let investors rushed out to beat the deadline. So if you wanted to sell your house quickly, now is definitely the time.
Demand is now larger than supply in most areas of the UK and prices are soaring, making it very hard for families to find and invest in a home.
Renting out your properties on a short-term basis can offer you lucrative return. The problem is, how can you manage your properties effectively?
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The state of UK commercial property market
Things are different with commercial real estate – for the better, it seems. As opposed to the housing market, commercial property is almost exclusively income-driven, so it is still very much tied to the stock market and the current recession.
So where do we stand as commercial property sellers and buyers?
Unlike residential properties, commercial real estate is actually much less prone to these types of fluctuations. However, in the current market, your best bet is selling fast so you can reinvest and establish yourself quickly into new premises.
If your property is in an area that’s been strongly hit by recession, you will have to be very flexible in terms of pricing. Some experts report prices dropping by up to 50%.
Finding new business premises: renting
Finding new business premises can often become trickier than selling. You will first have to decide whether you want to rent or buy. Renting is more flexible and you don’t need as much capital.
Rental agreements for business often run from three to 25 years, with a get out clause in case you need to get out early for whatever reason. Licence agreements are an even more flexible option, often lasting a year.
Remember that you might have to deal with planning permission for change of use and subscribe to a specialised business building insurance. If budget is the main reason pushing you to rent, don’t forget to consider maintenance and furnishing costs as well as possible rent increases every few years.
For some businesses, buying is the better option. Property assets will increase in value and you will have more freedom to set up your business the way you want to. In this case you will probably have to consider different kinds of mortgage and, most importantly, find premises that are big enough to sustain business growth.