POLL: Portfolio landlords moving to commercial as PRS becomes more difficult

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Large portfolio landlords are feeling upbeat despite the tough economic climate, with many eyeing the commercial sector for their next property purchase.

The Handelsbanken professional landlords survey – based on research among large UK investors with an average of 29 properties worth £14 million each – found that 59% expect to expand their portfolios, while only 14% expect to sell some or all of them.

Over half (57%) of those looking to buy properties plan to diversify into new sectors, with offices (43%) attracting the most interest as investors look to take advantage of depressed valuations.

The strong interest in commercial offices is surprising given the uncertainty around post-Covid 19 office occupancy and the rise of working from home, says Handelsbanken.

Correction

However, as values have undergone a correction over the past few years, many investors will probably be waiting for opportunities to buy at reduced cost with a view to longer term value creation, re-purposing assets and/or capitalising early on shifts in working patterns back towards more office usage.

James Sproule (pictured), UK chief economist at Handelsbanken, adds: “Commercial property values saw a major correction in the second half of 2022 as a direct impact of the higher interest rate environment.

“Average retail property prices were down by 15%, office prices were also down by 15%, and industrial unit prices were down by 25%.”

Three-fifths of those expanding their portfolio aim to buy in new regions, according to its poll. London was cited as the most attractive region over the next 12 months by investors (27%), followed by the South East (26%) while Yorkshire and the Humber and the West Midlands only attracted interest from 9%.

Three fifths (60%) of respondents have had requests for rental deferments/contract renegotiation while more than half (54%) have seen the number of void months increase over the past 12 months.

Read more: Safeguard your commercial property.

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