Stamp duty increases and reductions to mortgage interest tax relief have made buy-to-let investing less profitable, so many investors are looking at diversifying their property portfolios to increase the value of their business. Commercial property is one property sector into which investors are moving.

According to a February 2018 FinancialReporter.co.uk article, Colliers International, real estate advisors, reported that commercial property transactions in the UK totalled over £55bn in 2017, and are forecast to reach in excess of £50bn in 2018. Colliers predicts that industrial property will be the top performing type of commercial property, as there is a high demand for industrial property, particularly in London and the South East.

Commercial property has attractive returns for investors. Estate agents Savills says that commercial rents rise at about 1.9% a year, with industrial property having a 3.7% annual rise. Due to increase in online ordering, warehouses are in high demand and investors can achieve 5% rental yields. Leisure parks are also in a period of growth, with rental yields of around 5%.

Another advantage of commercial property is that lease lengths tend to be longer than for residential property. Commercial property also has fewer periods when the buildings are vacant and landlords are receiving no rental income.

The National Landlords Association reports that 20% of its members are planning to sell some of their property portfolio. Many of them are selling property because they want to diversify into commercial property. This could fuel an increased demand for commercial mortgages.