The dynamics of the UK commercial property market are changing but there is no need for investors to park their capital. They are good investment deals to be had – they’re just not where they used to be.

After battling some extraordinary headwinds in 2020, the recovery of the UK commercial property market is gathering pace. According to Colliers, a total of £3 billion was invested in UK commercial property in March, with Q1 spending at almost £7 billion.

While these figures represent a decline compared to five-year averages, they are a marked improvement on the levels recorded for 2020. Notably, spending in March was higher than that in February (£2 billion), suggesting that the pace of market recovery is quickening.

Sectors to target for commercial property investors

The clear winners for investors, and clear drivers of market growth, are logistic warehouses, supermarkets and medical properties. The positive performance of supermarkets needs little explanation, with opportunities linked to the sea change in consumer purchasing behaviour and to the fact that these businesses have kept their doors open.

The large-scale switch to online shopping is also behind the reason why logistics warehousing and related property, in particular that located next to major roads, is so popular. Another sector attracting investors is student accommodation. Widely written off when the pandemic first hit, this property type has shown notable resilience and still holds potential for investors.

High-street deals and keep an eye on office space

At the other end of the scale, high-street retail property is widely given a poor rating, although savvy investors shouldn’t believe all they read. A recent change in planning laws has opened up significant potential in this sector, with owners now able to turn retail space into flats and leisure facilities.

The woes of the office space sector have been amply reported and while it is still struggling, there is light at the end of tunnel. The gradual recovery of this sector is continuing and there could well be a sharp rebound looming as more and more workers return to offices and the attraction of social interaction, collaboration and creativity is rediscovered.

Financing commercial property investment

Momentum is building behind the recovery of the UK commercial property market, with the impact of the surge of optimism caused by the success of the vaccination programme and the rolling out of lockdown easing measures clearly visible.

The opportunity landscape for investors may have changed – with non-traditional sectors to the fore – but there are very obviously good deals to be made. And with the high-street retail space opening up, this market evolution seems far from over.

Also changing is how investors are accessing finance. Using the right commercial loan and mortgage lender is still imperative, but now it is essential that this partner provides access to the services of alternative lenders, whose ability to offer greater flexibility and a less automated and more personalised approach is making them increasing attractive.

To find out more about A&T Business Associates services for commercial property investors, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.