With commercial property investment volumes reaching £8 billion in Q1, is the market finally back on the up? And if so, what sectors should investors target in the second half of the year and beyond?

Commercial property market figures for Q1, including investment volumes data from Savills, are certainly encouraging, but the reality is slightly more stodgy – conditions remain challenging and if green shoots of recovery are visible, it is only just. Interest rates continue to weigh down the market, as does political uncertainty, with the country waiting for a general election and a likely change in government and policies.

Nevertheless, there are opportunities for savvy investors to grasp. The question is where.

Where are the commercial property investment opportunities in Q3?

In terms of mainstream commercial property market sectors, the growth engine continues to be the industrial space and this status looks set to remain unchanged going into the second half of the year and 2025.

However, reflecting the sector’s growing maturity, it is prime industrial that holds the potential, with secondary industrial offering much fewer opportunities. Industrial spaces with strong sustainable profiles and that are strategically located (in relation to transport hubs and key micro markets) will continue to be popular, as will sites that offer multiple revenue streams.

Growth engine unchanged but what about office space and retail?

With regard to another big hitter – office space – this market is seeing some colour at long last, although to date this uplift has been visible predominantly in London. The trend for downsizing office space is still evident. Other major cities may follow the capital’s lead but much might depend on how the return to office trend plays out.

Notably, as with the industrial sector, demand for green buildings is continuing to grow as companies increasingly work to meet sustainability expectations. Secondary office space looks set to a much tougher market.

Retail and hospitality have been two of the hardest hit sectors and there is little evidence that their fortunes are going to change significantly any time soon. The trend of retail-to-residential development is one that continues to run.

What alternative property sectors are the ones to target in Q3?

Interestingly, in terms of growth drivers for Q3 and beyond, it is the market’s lesser stars that look to be shining the brightest. Life sciences continues to perform well and is expected to maintain this energy going forward. A lack of existing facilities, longer-term tenants and premium rents, as well as an ageing population are all factors that continue to drive momentum in this space.

Talking of population demographics, there are opportunities for commercial property investors at both ends of the scale. Aged-care facilities remain a solid choice, with the premium segment a notable performer, while dedicated student housing is also posting healthy results. The future of the government’s Renters Reform Bill may prove a driver of significant growth in the purpose-built accommodation space.

Why your choice of commercial loan and mortgage provider matters

It’s good to hear talk of meaningful growth again, but it is clearly early days and expectations should be managed. However, there are prime opportunities for switched-on investors. Key to moving on these in today’s marketplace is access to finance.

Despite the optimism, the market continues to be fragile and this is reflected in the nature of the opportunities available. This means that ease of access to finance and flexibility and affordability are vital. And against this backdrop, your choice of commercial loan and mortgage provider is critical.

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.