With the UK commercial property market beginning to show signs of improvement now could be a good time for investors to add to their portfolios.
Those who are prepared to take a look at the secondary market will find there is less competition for assets and, providing they choose carefully, it can provide a secure income.
Writing in the FT Advisor investment fund managing director Michael Hardman has the following advice for investors.
As with any property investment location is always the key factor. Potential buyers must look at issues such as the property’s proximity to transport links and whether or not it is on the right or wrong side of ongoing or future regeneration projects.
They will also need to perform the appropriate due diligence to inspect the property before deciding whether to invest in the secondary market. Questions will include the covenant of the tenants or, if the property is vacant, how long might it take to attract businesses to the building?
Hardman is keen to point investors in the direction of the provincial market where there are plentiful opportunities to acquire income generating assets.
High-quality properties outside London can prove to be wise investments, he says, while others present a less favorable opportunity for investors. Again, location is the all-important factor in this respect.
The key to making the right decision in this respect is to consider whether or not the property will perform well over the long term.
Over the past 25 years, strong secondary market properties have consistently offered a rate of return of 8-10 per cent per year if managed properly.
During this time, there have been a number of highs and lows in the market which have created above average returns at certain times and drops in the market at others that have created variations by as much as 40 per cent in some cases.
So the secondary market is not one where an investor can make a quick profit and then get out. A more realistic view is to look at the medium to long term opportunities it provides.
