Lawyer Monthly Magazine - July 2019 Edition

In reaction to the increased demand for private rented residential property, developers have been eager to step up supply. Unsurprisingly, this is especially the case across many of the major British cities, with London currently accounting for the lion’s share of build to rent in the UK. What About Commercial Property? The growing importance of residential build to rent inevitably raises questions regarding its potential impact on other areas of the property sector. In the wake of Brexit, the commercial property market has been undergoing its very own changes – many of which are relevant to the strength of commercial property as an investment opportunity. Commercial property – which covers the totality of real estate used for business activities – has long been a favoured investment opportunity for property investors. Much like the property sector as a whole, Brexit has helped to drive increased uncertainty, with some segments of the market significantly outperforming others. Despite this, recent figures by Savills show that investment in UK commercial property continued to stand at a robust £62.1 billion in 2018. The idea that investments in commercial property differ substantially from those made in residential property is far from new. For example, commercial properties may often involve a longer lease, offering investors income over a longer period of time. The higher value of commercial properties often also paves the way for numerous methods of investment, whether that be through direct investment or through an indirect property fund made up of multiple parties. As such, commercial property investments are more complex in nature, often requiring the involvement of commercial property solicitors. Differences aside, one could nonetheless argue that commercial property investors can take valuable lessons from current growth in the area of residential build to rent. Commercial Lessons from the Residential Build to Rent Boom Although the increasing cost of property ownership may represent less of a threat to businesses in comparison to individuals, the decision to rent flexible commercial property continues to be made by countless commercial organisations. Initially, this had especially been the case for smaller and medium-sized businesses (SMEs), many of which lack access to the financial resources available to larger organisations. Since then, businesses of all sizes have followed suit. In recognition of that fact, demand for flexible office space alone is projected to grow by as much as 30% over the next five years. If the build to rent boom has taught us anything, it’s that significant gains await investors who react successfully to market trends. As businesses are opting to secure more flexibility in the form of commercial property rentals, there may be significant room for commercial property investors to benefit from the very same developments that have helped drive residential build to rent. No matter what the future of UK commercial property may bring, taking heed of current FIRM PROFILE Smith Partnership combines decades’ worth of legal expertise with a desire to do things a little different- ly. Apart from offering the knowledge and hands-on experience you’d expect from a leading UK law firm, we also pride ourselves on taking a straight-talking, jargon-free approach to your case. Smith Partner- ship’s expert legal teams offer a range of services that cover various aspects of the law. From crimi- nal law to personal injury claims and from business defence to property law, we’re here to offer both individuals and busi- nesses a solution to every legal need. www.smithpartnership.co.uk “Demand for flexible office space alone is projected to grow by as much as 30% over the next five years.” developments in the property industry is likely to go a long way in safeguarding long-term investment in the sector. In any case, all signs point towards diversification as a tried and tested characteristic of a successful property portfolio. LM 23 Smith Partnership JUL 2019 www. lawyer-monthly .com