(1888PressRelease)
July 07, 2007 - The term buy-to-let is often used by the media as if it relates to just residential property lettings. However, while private residential landlords do dominate the numbers of those who are engaged in property investment, there are a percentage that are engaged in the commercial sector, be that solely or in addition to their residential market activities.
A key difference between the two sectors is that commercial property investment often requires significantly more investment. Therefore, the prospective commercial landlord will need to have access to a larger sum of capital than they would need for a residential acquisition.
It is often the case that landlords will move across to the commercial property investment market once they have enjoyed some success in the residential sector. Indeed, there is a marked trend for property investors to do this, according to one industry body. James Cannon, head of property auctions at Savills, said that "as investors get more money, they tend to want to do commercial".
However, investors thinking of adding a commercial property to their portfolio should be aware that it is a different animal to residential investment.
Andrew Jackson, investment director for property at Standard Life Investments, told What Investment: "Commercial property tends to be driven by economic fundamentals, such as growth in gross domestic product, while residential is much more sensitive to interest rates, average earnings and employment rates.
"Therefore, they can perform quite differently."
One factor that tempts investors to make the switch to commercial property investment is that "with residential, obviously the landlord has the problem of managing the property and looking after it", said Mr Cannon.
He also pointed out that it is usually possible for commercial property investors to obtain a fixed-rate mortgage product from banks and building societies, which can be attractive in the current climate of seemingly continuous interest rate rises.
The interest rate has been increased four times in the past year, going up a quarter of a per cent each time. It now stands at 5.5 per cent, but analysts are widely tipping another increase next week when the Bank of England's monetary policy committee meets to discuss inflation and the interest rate.
However, according to Mr Cannon, the commercial property market is one area that is "still fairly robust" and attractive to investors because it is perceived as more reliable than stocks and shares, which have left some investors "slightly hesitant after the last crash". Even if you are holding stocks and shares, "having some of your money in property is a good thing", he advises.
