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A Comprehensive overview as to why you should invest in Commercial property.

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Welcome to our comprehensive guide to commercial property investment in the United Kingdom. As experienced professionals in the field, we aim to provide you with a thorough understanding of the benefits, risks, and opportunities involved in investing in commercial properties in the UK. In this guide, we will explore the current market trends, analyze the potential returns and risks, and provide you with practical tips to help you make informed investment decisions.

Market Overview:

The UK commercial property market is one of the most vibrant and dynamic markets in the world, offering a wide range of investment opportunities across different sectors, including retail, office, industrial, and hospitality. According to the latest data from the Royal Institution of Chartered Surveyors (RICS), the demand for commercial properties in the UK has been steadily increasing, with rental growth expected to remain strong in the upcoming years.

Factors Influencing Commercial Property Investment:

Investing in commercial properties can be lucrative for investors looking for long-term income and capital appreciation. However, it is important to note that several factors can influence the success of your investment. Some of these factors include:

  1. Location: The property’s location is crucial in determining its value and potential returns. Investing in properties located in prime areas, such as city centres or near transportation hubs, can offer high rental yields and capital appreciation.
  2. Market Trends: Keeping abreast of the latest market trends and forecasts is essential for making informed investment decisions. Understanding different sectors’ current demand and supply dynamics can help investors identify potential opportunities and risks.
  3. Property Condition: The property’s condition can impact its market value and potential returns. Investing in properties that require renovation or maintenance can be a cost-effective strategy to increase the property’s value and rental income.
  4. Financing Options: Choosing the right financing options can impact the overall profitability of your investment. It is important to consider the interest rates, repayment terms, and fees associated with different financing options before deciding.

Benefits of Commercial Property Investment:

Investing in commercial properties can offer several benefits, including:

  1. Stable Income: Commercial properties can offer stable and predictable income through rental payments, providing investors a reliable source of passive income.
  2. Diversification: Investing in commercial properties can be a helpful strategy to diversify your investment portfolio and minimize risk.
  3. Capital Appreciation: Commercial properties located in prime areas can offer significant capital appreciation over the long term, providing investors with a valuable asset that can increase in value over time.
  4. Tax Benefits: Commercial property investment can offer several tax benefits, including deductible expenses, capital allowances, and tax-efficient financing options.

Risks of Commercial Property Investment:

Investing in commercial properties can also pose several risks, including:

  1. Economic Factors: The performance of the commercial property market is closely linked to wider economic conditions, such as interest rates, inflation, and GDP growth. A downturn in the economy can impact the demand for commercial properties and reduce their value.
  2. Vacancy Rates: The risk of vacancy is a significant factor in commercial property investment, particularly in sectors such as retail or hospitality, where demand can be impacted by changing consumer behaviour or technological disruptions.
  3. Tenant Risk: The financial stability and creditworthiness of tenants can impact the rental income and profitability of the investment.

Conclusion:

Investing in commercial properties can be a rewarding and lucrative opportunity for investors looking for long-term income and capital appreciation. However, it is essential to carefully evaluate the potential risks and benefits of the investment and make informed decisions based on sound market research and analysis. By keeping abreast of the latest market trends, choosing suitable financing options, and identifying potential opportunities, investors can achieve success in the UK commercial property market. If you need any assistance or further information, please feel free to contact us.

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Update to EWS1 form and RICS valuation guidance

On 16 March 2022, RICS, UK Finance and BSA updated the EWS1 form. At the same time, RICS updated the valuation guidance: Valuation of Properties in multi-storey, multi-occupancy residential buildings with cladding to reflect the new Government advice: BSI PAS9980:2022 – Assessing the external wall fire risk in multi-occupied residential buildings.

The following details what has been updated and links to where it can be located on rics.org.

RICS Guidance:

The criteria for the RICS guidance note remains valid, following the review by the independently led Standards and Regulation Board on 10 December 2021. However, as the guidance was introduced based on the Government Consolidated Advice Note (CAN), which was withdrawn in January 2022, the guidance note now includes a boilerplate stating that this guidance was drafted with reference to  Government guidance in force at the time, which has now been withdrawn, and replaced with the publication of PAS 9980:2022. This guidance note remains valid at this time and remains under review by RICS’ independent Standards and Regulation Board.

View the guidance note

EWS1 Form:

The EWS1 form categories remain the same but following the withdrawal of the CAN, the implementation of the PAS9980, and to ensure proportionality, the EWS1 form has been updated to reflect these changes.

It now includes reference that those who have completed the EWS1 Assessment Training Programme are now able to complete the EWS1 form and covers whether interim measures are required.

In addition to this, and whilst the way to assess and the options remain the same, the form is now electronic making it easier to access. The form also now includes version control. This will increase transparency for how many times a building has been assessed by the same assessor or company and will provide a clear audit trail for how many assessments have been completed on the same building by the same assessor or company.

RICS strongly recommends that all completed EWS1 forms are uploaded to the FIA portal to avoid duplication.

SOURCE: RICS

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How to provide accommodation under Homes for Ukraine

The Department for Levelling Up, Housing and Communities (DLUHC) has published updates to their guidance for people across the UK, who intend to offer accommodation to those fleeing war in Ukraine.

The guidance outlines that the scheme is a bespoke arrangement of non-paying guests, so sitting outside the usual tenancy regimes. Registration sits at the heart of the scheme. Those registered will receive updates and information on the checks that DLUHC will make on both sponsors and Ukrainian nationals. 

Impact on the Private Rented Sector 

The UK Government has made it clear that tenants must ask permission from the landlord if they wish to be a sponsor. Additionally, the scheme requires the accommodation to be self-contained or comprise at least a spare room that is unoccupied. 

Accommodation 

It is important that those making accommodation available are confident that it can be provided for a minimum of six months. If the arrangement needs to end early, it will fall to the local authority to find alternative accommodation.

The UK Government has said that further information around the status of the arrangement (including expected accommodation standards) and the role of the local authority in offering wider support around employment, education and healthcare will be available shortly.

Security checks

All applicants meeting the requirements of the scheme will have undergone a visa application process which includes police and antiterrorism security checks. All those offering accommodation as sponsors will also be subject to express, standard security checks and (given the proximity to children and vulnerable adults) a Disclosure and Barring Service check along with a visit from the local authority to check that the accommodation is appropriate. 

Rental payments, mortgage and insurance conditions

Neither landlords nor homeowners are permitted to charge rent. The UK Government is offering a ‘thank you’ payment of £350 per month, per residential address and payments are available for up to 12 months.  

The Association of British Insurers has stipulated that homeowners accommodating applicants to the Homes for Ukraine scheme in their homes will not be required to contact their insurer. However, where the sponsor is a landlord or a tenant, the insurer will need to be notified. Both landlords and homeowners with mortgages on the accommodation should notify their mortgage lender. 

Ending the sponsorship

Sponsors are asked to provide stable housing for a minimum of six months however that can be extended if mutually agreed. The wording of the guidance states:

If you don’t want to continue the arrangement beyond six months, you should let your guest know in plenty of time (for example, one month) so they can make other arrangements. Ukrainian people on this scheme have access to public funds during their time in the UK, and at the end of their sponsorship will be able to rent a property like anyone else. If they need further support, your local authority can support them in finding alternative accommodation.

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New law to resolve COVID-19 commercial rent debts

On the 24th of March 2022, the Commercial Rent (Coronavirus) Act 2022 received Royal Assent. This means in England and Wales, there will be a legally binding arbitration process for eligible commercial landlords and tenants who have not already reached an agreement to relive outstanding commercial rent debts relating to the pandemic.

The law applies to commercial rent debts of businesses that were mandated to close from 2020 until the restriction date, including businesses including gyms, pubs and restaurants. If the debts are accrued outside these times, they won’t be in the scope.

Code of Practice

The UK Government published in 2021 an updated Code of Practice to provide a straightforward process for settling outstanding debts for commercial landlords and tenants. If a tent can pay they rent debt in full, they should do so immediately. Tenants unable to pay in full should agree with their landlord with the expectation they can share the burden where they can and only as far as deemed necessary, allowing the tenant more time.

For tenants that have failed to reach an agreement within the Act’s scope, either one of the parties can apply for arbitration unilaterally, which will act as a backup. Parties are allowed to negotiate outside of the legal arbitration process. The code followed allows alternative dispute resolutions for tenants and landlords and can offer things such as mediations if they wish.

To apply for arbitrations, there’s a six-month window from the beginning of the legislation. Arbitrators may award a reduction of protected rent debt and/or time to pay, with a maximum period to repay of 24 months.

The legal arbitration process is delivered by arbitrators nominated by authorised arbitration bodies from a list of appropriate and available arbitrators.

There will be an approval process that arbitrator’s bodies have to go through for the time to demonstrate their suitability.

The Department for Business, Energy and Industrial Strategy (BEIS) publish an index of approved arbitration bodies in due course. When a dispute is eligible, landlords or tenants can apply straight to any authorised arbitration body to appoint an arbitrator.

SOURCE: Propertymark

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Demand for offices in London halved amid lockdown

The demand for office spaces in London is tanking thanks to the coronavirus pandemic, according to a new study. The research also shows that available second-hand office space also spiked over the last year, reflecting the devastating impact the crisis had on the city’s businesses.

Recent years have been characterised by a spike in demand for London’s real estate sector. Despite the uncertainties of Brexit, overseas investment continued to flow into the capital’s office space market, as the low pound continued to make the European financial hub an attractive prospect due to its residual links with the continent. In the first half of 2017 alone, for example, £5 billion in Chinese capital was sunk into the city on this basis.

According to a new study by property advisory firm Bidwells, however, the pandemic has decimated the market over the last year. The consultancy found that London’s availability rate of office space had steadily fallen since 2016, to sit at a low of just over 3 million square feet in 2019. However, following the coronavirus outbreak this more than doubled to 6.6 million square feet.

While this was partially due to new Grade A properties coming onto the market – almost double the amount available in 2019 at just over 1 million square feet – the growth in availability was primarily driven by second-hand space. At almost 2.5 million square feet, the sudden boom in second-hand availability reflects the tumultuous year London’s businesses have faced, with many either vacating their premises to reduce spending amid a huge recession, or collapsing into insolvency, leaving spaces vacant.

While more of this real estate might have been snapped up in prior years, demand has nosedived to less than half of the 10-year-average. Bidwells found that London saw 1.8 million square feet of office space taken up by new occupants in 2020, in stark contrast to the last three years – which each saw more than 4 million square feet taken. The situation was even more pronounced in the more expensive Grade A segment, with less than 500,000 square feet being taken up – compared to more than 1 million in 2019.

Commenting on the research, Sue Foxley, Research Director at Bidwells said, “Central London Office investment has fallen to the lowest level in a decade. The pandemic impacted on investment activity in the Central London office market, with total activity over the year falling to £7.5 billion, the lowest level since the financial crisis impacted years of 2010 and 2011.”

Bidwells anticipates that the market will rebound in 2021, however, as investor interest in London based offices returns. Responding to the rapid roll-out of vaccinations within the UK, overseas investors are again set to dominate the market, and have already completed £4.3 billion in deals during the last quarter of the year. Despite many businesses opting to have flexible working schedules, post-pandemic offices are still seen as a valuable part of the company, serving as an HQ; this is being currently being asserted by a growing number of companies.

This news will come as some relief to businesses who have built their model on serving office workers. During the lockdown months, it was suggested that lower consumer spending linked to offices could see businesses lose out on £12 billion, impacting canteen workers, security guards and waiters could be among those whose jobs hinge upon workers being present in offices.

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OUR NEW EXETER HEAD OFFICE

We’re excited to announce that we have moved into a new office based in Marsh Braton Exeter. In addition to existing head-office based teams such as Commercial, New Homes, Property Management, Estate Management, the new office is also the new home to other key divisions in the business, such as Winfields Insurance Brokers and Winfields Chartered Surveyors. The distinctive new landmark building, just moments from the new Marsh Barton train station, provides 14,000 sqft of space and is equipped with the state-of-the-art technology to ensure the safety of staff and visiting clients, including a cutting edge ventilation system, and automatic temperature checks on entry.“Our new headquarters will allow the divisions that support our branch network to expand and grow in line with our clients needs,” said Chairman Rob Sargent. “This new HQ will see one of the biggest and most diverse concentrations of property professionals under one roof within Exeter to service the South West of England.”Decades of experience has shown that estate agency remains a people business. This is reflected in our new head office, which is an investment in our own people, allowing us room to grow alongside our private and corporate clients alike.”
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Demand for offices in London halved amid lockdown

The demand for office spaces in London is tanking thanks to the coronavirus pandemic, according to a new study. The research also shows that available second-hand office space also spiked over the last year, reflecting the devastating impact the crisis had on the city’s businesses.

Recent years have been characterised by a spike in demand for London’s real estate sector. Despite the uncertainties of Brexit, overseas investment continued to flow into the capital’s office space market, as the low pound continued to make the European financial hub an attractive prospect due to its residual links with the continent. In the first half of 2017 alone, for example, £5 billion in Chinese capital was sunk into the city on this basis.

According to a new study by property advisory firm Bidwells, however, the pandemic has decimated the market over the last year. The consultancy found that London’s availability rate of office space had steadily fallen since 2016, to sit at a low of just over 3 million square feet in 2019. However, following the coronavirus outbreak this more than doubled to 6.6 million square feet.

Office supply (December 2020) + Office demand (December 2020)

While this was partially due to new Grade A properties coming onto the market – almost double the amount available in 2019 at just over 1 million square feet – the growth in availability was primarily driven by second-hand space. At almost 2.5 million square feet, the sudden boom in second-hand availability reflects the tumultuous year London’s businesses have faced, with many either vacating their premises to reduce spending amid a huge recession, or collapsing into insolvency, leaving spaces vacant.

While more of this real estate might have been snapped up in prior years, demand has nosedived to less than half of the 10-year-average. Bidwells found that London saw 1.8 million square feet of office space taken up by new occupants in 2020, in stark contrast to the last three years – which each saw more than 4 million square feet taken. The situation was even more pronounced in the more expensive Grade A segment, with less than 500,000 square feet being taken up – compared to more than 1 million in 2019.

Commenting on the research, Sue Foxley, Research Director at Bidwells said, “Central London Office investment has fallen to the lowest level in a decade. The pandemic impacted on investment activity in the Central London office market, with total activity over the year falling to £7.5 billion, the lowest level since the financial crisis impacted years of 2010 and 2011.”

Bidwells anticipates that the market will rebound in 2021, however, as investor interest in London based offices returns. Responding to the rapid roll-out of vaccinations within the UK, overseas investors are again set to dominate the market, and have already completed £4.3 billion in deals during the last quarter of the year. Despite many businesses opting to have flexible working schedules, post-pandemic offices are still seen as a valuable part of the company, serving as an HQ; this is being currently being asserted by a growing number of companies.

This news will come as some relief to businesses who have built their model on serving office workers. During the lockdown months, it was suggested that lower consumer spending linked to offices could see businesses lose out on £12 billion, impacting canteen workers, security guards and waiters could be among those whose jobs hinge upon workers being present in offices.

Source: Consultacy.uk