Though commercial property investment can still provide good returns, investors need to be aware of two major changes that could affect them: flexible workplaces and the difficulties in the retail sector.
According to Cushman and Wakefield property consultants, flexible workplaces accounted for 17% of office leasing activity and is expected to increases in 2018. In 2016 it was only 6%.
Developments in technology mean that many workers can work from anywhere and no longer need permanent workspaces. Many start-up and growing businesses want short-term leases so that they have the flexibility of renting only the number of desks that they need, which increases as they expand.
Commercial property landlords have traditionally benefited from long leases. Shorter leases mean less security and increase the risk of property being vacant. There are still maintenance expenses, rates, and commercial mortgage payments to be made on empty property. As long as landlords can adapt to the changes in lease requirements for flexible office space requirements, they can achieve good returns.
Another area that is changing is the retail sector. The shuttering of Toys R Us and Maplin have highlighted the problems in the retail sector. With many retailers having to deal with increased rates and lower turnover, they are pressurising landlords to reduce rents or freeze rent increases. Online sales continue to grow which means that warehouse property is a growth area.
Some retailers are combining resources to create Business Improvement Districts which create projects designed to improve retail areas and they sponsor events to increase footfall.