A beginner’s guide to commercial property investment

by Jonathan Adams

Commercial property consists of shops, office buildings and industrial premises. You can make commercial property investment in a number of ways. You can buy a property yourself, buy a fund which has physical property in its portfolio, invest in property companies, developers and house builders or in funds invested in those companies. A fund with physical property makes commercial property investment directly and it can be open-ended or close-ended type. It will perform tasks such as buying the property physically, maintain it and collect rent.

However, such funds can be illiquid as offices and other commercial spaces are not bought or sold easily. Commercial property investment can be very useful in tough times because they can be traded in times of volatility. They assist in preserving wealth during such difficult times because of their lack of correlation with equities and bonds.

Investors can buy shares in a Reit or Real estate investment trust such as Land Securities or British Land for commercial property investment. The Land Securities or British Land has a portfolio of properties. But, you can make investments in other funds as well for diversifying your portfolio since it is single company. Another way for commercial property investment is to buy a property and lease it to companies, offices or business enterprises on rental basis. It is a decent way to gain access to the property sector. This will enable you to step onto the property ladder which will pave the way for better investment opportunities in the future.

Under the bricks and mortar funds, managers typically invest in a range of commercial property investment. They invest in wide spectrum property portfolio which includes commercial property such as offices, warehouses, shopping centres and car parks.

Apart from that, commercial property investment includes prime, secondary or tertiary property based on the quality. The fund managers expertise in particular sectors of the property market. Among them, the prime property is the property with highest quality recognition. Properties under such category are located in big cities and towns. Even in the big city, they are located at premium or upscale areas. Such properties attract the best of clients and tenants from within the country and abroad. Other types of properties under commercial property investment include secondary and tertiary properties and they are located at relatively less prime spots in big cities or in small or medium cities. Tenants or clients for these sub-quality properties are harder to find and they may lie vacant for more times against properties of higher value or worth.

This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

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