The oldest and most traditional properties used for office space in Edinburgh are townhouses. In the West End and the areas between Charlotte Street and St. Andrew’s Square, fund management, and professional service sector companies have prestigious offices.
Driven by demand from property investors, townhouses are not cheap, costing between £500,000 to £1.5 million. Many investors are attracted by the potential to convert townhouses back to residential accommodation.
Because Edinburgh townhouses are listed buildings, owners do not have to pay business rates if they are vacant.
Due to many townhouses being converted to residential use, there is now a shortage of office space. This has increased the rent levels for townhouse commercial tenants.
Investors that purchase townhouses can offer space flexibility for tenants, from one room spaces, to whole floors and complete buildings. Rental yields can be around 5%, with strong capital growth expected.
Investors like Edinburgh townhouses because it is easy to find tenants willing to pay top rents. These old buildings were built well and are generally in good condition.
Townhouses are in demand from both businesses and people who want to live in central Edinburgh. This gives investors the flexibility to be able to convert property to residential use if demand for office accommodation falls in the future. Commercial mortgages are available to purchase townhouses, but if the landlord wants to convert buildings to residential use, they may need to remortgage to a buy to let mortgage if the commercial mortgage forbids renting to residential tenants.