CRISIS SHOULD NOT DAMPEN APPETITE FOR COMMERCIAL PROPERTY INVESTMENT
Published 27 May 2020
At a time when the economy is facing the biggest fiscal squeeze in living memory, talking about investment might seem a little counter-intuitive. It is certainly true that the investment market has been shaken by the events of the past couple of months – but that does not mean that there are not opportunities, or investors willing to chase them.
The stock market could presently be described as only being for the brave. Meanwhile, interest rates of 0.1 per cent make many traditional investments look poor value.
And yet there is still plenty of capital in the market, which could be why there are many investors looking at the commercial property market. As well as offering significantly better returns than in many investment categories, property is seen as a safe haven in these troubled times.
The key is to pick the right type of commercial property investment. Perhaps the safest bet at the moment is agricultural land, given the renewed focus on food security and the relatively minor effect of coronavirus on farming activity.
But other categories are also looking attractive. Chief among them is warehousing. This has been a boom area for a while due to the seemingly unstoppable march of online shopping; the more or less complete shutdown of bricks and mortar retail has simply accelerated this trend.
That doesn’t mean that retail property is a no-go area for the investor. But it does mean that choosing the right kind of retail premises is vital; local convenience shopping has received a shot in the arm from the crisis, while comparison shopping on the traditional high street has been very hard hit. Once again, the Covid-19 crisis has accelerated a trend which was already happening.
Office investment is another nuanced area. Some commentators are saying that the big office building has had its day. But research shows that there is a real appetite for face-to-face working, for reasons of ideas sharing, team camaraderie and motivation. Working from home will undoubtedly increase, but reports of the death of the office have been exaggerated. The savvy investor will be seeking quality above all, and with a dearth of such buildings in Norwich, in the long term demand will continue to outstrip supply.
The crisis has also thrown specialist investment classes such as medical premises into focus. This has been something of a Cinderella area for investors, but expect to see it become more mainstream.
The commercial property market is an effective mirror of the wider economy, so we should be taking some comfort from the fact that there is still a good level of demand from investors.
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