Large property investment companies such as M&G Real Estate and Fidelity International have been purchasing what are classed as riskier commercial properties. These include properties where
leases are nearing their end, empty properties and ones that need refurbishment.Large investors are buying these properties because prices have fallen by 15% since the Brexit referendum in June 2016. Paul Crosbie manages M&G’s Enhanced Fund and says that the price fall on risky properties is only found in Britain. He said:
“We invest in something like 28 countries globally. There isn’t this level of dislocation in pricing anywhere else.”
After the Brexit vote, property investors favoured low-risk prime properties such as grade A offices with long-term quality tenants and a central location. This high demand for prime property has driven prices up, especially in London.
The less demand for riskier properties resulted in falling prices, and this has made them attractive investments. Alison Puhar, head of UK real estate at Fidelity International, says that her company has been comfortable for a long time with purchasing riskier properties. She recognises that prices have fallen to a level that makes them attractive to other investors.
Smaller investors are also finding opportunities in nonprime commercial property. Commercial mortgages are available to purchase property at reasonable interest rates, and bridging loans can be used to fund refurbishment work. A good mortgage broker with knowledge of the commercial property market can find the best loan deals for investors, small or large.
