Tips on Finding the Best Commercial Property Investment in London for you

Tips on Finding the Best Commercial Property Investment in London for you

updated January 19, 2020
Tips on Finding the Best Commercial Property Investment in London for you

Some people have concerns about making any sort of financial investment which may be due to their overly conservative outlook, upbringing, character, job status or even age.

Their concerns stem from not wanting to lose money (which no one wants to do!). Yet what some people don’t realise is that, by holding cash at home or in the bank at low-interest rates, due to inflation, the real value of their wealth is steadily being eroded.

Many of these concerns can be eliminated or mitigated when one considers investing in commercial investment properties in London. Capital growth and a stable income stream are just two of the expected benefits.

The primary question though is whether to invest directly into the London or European commercial markets or place your funds into a commercial property bond.

How to find the best Commercial Property Investment for you?

Which sector is right for you?

Investment in commercial property in London can be undertaken in variety of ways. But, before you decide what’s right for you, let’s take a step back and look at some of the basics.

Broadly speaking, property investment covers two primary sectors, namely commercial (offices, retail, coworking and leisure properties, ie hotels) or residential (houses, apartments or serviced apartments). Investment may be in existing properties or in land for development.

Of course, there are opportunities to invest in the warehouse, logistics and industrial sectors but these tend to attract a more specialised type of investor.

What are your investment goals?

Once you have decided which property sector you are interested in, it is necessary to start looking at matters such as investment returns (yields), ease of entry into the chosen market sector, development issues and ongoing management of the assets.

The investment returns or yields will vary depending on the sector. For example, yields from investing in prime grade A offices in London which are usually leased on a long-term basis and on a “FRI” lease (“Full Repairing and Insuring”, that is the Lessee essentially pays all outgoings so that the rent the Lessor receives is already “net”) will be lower than, say for retail shops or hotel properties. This is because the security of income is guaranteed, especially if the Lessee is a “blue-chip” occupier with a strong covenant. Yields from such property may be in the range of 4% to 4.75% and may vary by district as well as the property.

For Grade B and C offices, yields may be slightly higher, mainly as the risk from renting to lower grade lessees and less attractive locations is perceived to be higher.

For retail units and hotels, generally, investors require slightly higher investment returns. This is partly due to the nature of the businesses being carried out at the properties. These businesses may be subject to short term changes in the London business outlook or economy and are considered as slightly higher risk. For example, there may be major disruption to their business from Brexit or climate change, or a drop in tourism, thereby affecting the stability of the rental income.

Owing to the nature of property development, yields on new projects and offered by commercial property bonds tend to be higher. 

How do you wish to receive income and do you want to be hands-on or hands-off with your investment?

Apart from the fact that you wish to obtain the best yields on your financial investment, if you’re investing directly into property, other considerations include as to whether you wish to collect rental income quarterly or annually. Plus, do you want to receive “net” income or be paid “gross”, and then disburse the operating and other expenses of the property yourself. Be sure here, as some investors overlook the costs which have to be deducted from gross income. There are often unexpected costs or taxes which can reduce the net yield the investor receives.

Another question is whether you want to be hands-on and deal with the various issues which arise from investing in property? Or, do you prefer to let an experienced developer with a long track record of successfully developing and issuing commercial property bonds take away the hassles and headaches?

If you do not wish to be hands-on, property investment bonds are probably the best way forward. They enable investors to avoid paying maintenance fees, stamp duty, council tax, insurance payments, and more, and still provide the opportunity to invest in the London property market without taking on debt.

Again, if you wish to invest directly, the period of time involved in looking for and finding a commercial property that fits your investment goals can be considerable. The length of time before you earn an income after acquiring a site, getting all of the necessary approvals and actually building may run into years.

On the other hand, investing in commercial property bonds can give you immediate returns. In view of the comparative yields of investing only in prime London office space or the risks of investing in hotel-type property mentioned above, investing in bonds appeals to many investors.

Start Investing in Commercial Properties

Investing in commercial properties in London or other major European cities can offer attractive investment returns over a short to medium term. Indeed, investing in commercial real estate bonds can be an excellent first step for both aspiring, but also for experienced, investors—eliminating the worry of development-related hassles.

Property bonds also offer security. However, some potential investors do not fully understand it—or know how to get started in investing in one.

So, here is a helpful overview about property bonds and a number of key advantages of investing in such issued by a reliable property developer.

Commercial property bonds:

  • enable individual investors to benefit from the profitability associated with the property sector, without all the downsides of direct property ownership;
  • can be  asset-backed, so there are underlying assets to generate the investment returns;
  • allow investors to start investing without the need for a mortgage or loan or having to wait and save up enough to place a deposit on or buy a property;
  • offering collective experience and insights, together with shared liabilities, helps to mitigate risks substantially; and
  • generate some of the most attractive returns currently available in the market place.

Nao Group offers both corporate and individual clients the opportunity to invest in commercial property investment bonds. We have a long history of development projects in central London so, if you wish to have investment success in commercial real estate sector, you should carefully review our track record.

Contact us today to find out more about in investing in commercial properties in UK, or if you want to learn more about Nao’s property investment bonds.

Nao Group is a commercial property developer creating coworking spaces in London and around the globe: building communities, not just places to work!

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