Building And Managing A Commercial Property Portfolio

Steven Rimmer

Description

Building and Managing a Commercial Property Portfolio concentrates on investing in and managing commercial property. This requires particular skills and a knowledge of the commercial property market. The management skills required are more specialist and the financial aspects are distinct from those of residential property. Standard legal documents are contained within the book. By following the advice offered you should be in a position to develop and manage a commercial property portfolio successfully.

Sujets

• Employabilité, métiers et formations
• Reino Unido
• United Kingdom
• Property law
• Great Britain
• Royaume-Uni

Informations

• Publié par: Straightforward Publishing
• Date de parution: 25 mai 2015
• Nombre de lectures: 0
• EAN13: 9781847165664
• Langue: English

Extrait

A GUIDE TO BUILDING AND MANAGING A COMMERCIAL PROPERTY PORTFOLIO
THE EASYWAY
STEVEN RIMMER
Easyway Guides
Easyway Guides
Straightforward Publishing 2015
All rights reserved. No part of this publication may be reproduced in a retrieval system or transmitted by any means, electronic or mechanical, photocopying or otherwise, without the prior permission of the copyright holders.
ISBN 978-1-84716-515-2 ISBN ePub 978-1-84716-566-4 ISBN Kindle 978-1-84716-565-7
Printed by 4Edge Press
www.4Edge.co.uk
Cover design by Bookworks Islington
Whilst every effort has been made to ensure that the information contained within this book is correct at the time of going to press, the author and publisher can take no responsibility for the errors or omissions contained within.
Contents
Introduction
Part 1. Building Up Your Commercial Property Portfolio-An Overview
Chapter 1. The Commercial Property Market
Chapter 2. The Main Characteristics of Commercial Properties
Chapter 3. Buying Commercial Property
Chapter 4. Commercial Property Funds and Self-Invested Personal Pension Schemes
Chapter 5. Tax and Commercial Property
Chapter 6. Commercial Property and the Planning System
Chapter 7. Purchasing a Commercial Property at Auction
Part 2. For the Smaller Investor: Managing Your Commercial Property Portfolio-General Advice.
Chapter 8. Business Leases Generally
Chapter 9. Service Charges and Business Leases
Chapter 10. Assignment and Sub-Letting of Business Leases
Chapter 11. Repossession of a Business Lease by a Landlord
Chapter 12. Business Leases and Disputes
Chapter 13. Security of Tenure for Business tenants
Conclusion
Useful Addresses and Websites
Index
Appendix 1. Forms and their purposes under the Landlord and Tenant Act 1954 Part 2
Appendix 2. Sample Business Lease
***************
Introduction
A Guide to Building and Managing A Commercial Property Portfolio - The Easyway, has been written specifically for the smaller investor who wishes to invest in commercial property and develop a portfolio of properties which will produce an income and also, over time, enhanced capital value. It is also for those who wish to develop a mixed portfolio of directly owned properties and investments through property funds.
Commercial property investment, whether through commercial property funds or through direct investment in smaller retail units or office blocks, has been a bit of a roller coaster. Like every or asset class, this particular investment suffered during and after the credit crunch of 2007. However, the sector has now picked up and careful investment can produce good returns.
Commercial property is different to residential property as, although the legal structure of ownership is the same, different rules apply when calculating rental yields and capital values. Also, a different tax regime applies. Different rules also apply to the lease and rent reviews. It is important to know the finer points of commercial investment and management which differentiate it from residential investment.
In Part 1 , this book will initially concentrate on commercial property investment generally, defining commercial property and discussing issues such as costs of investing and the various ways that an individual can invest. We will also discuss the economics of investing and the tax regime. Following this we will discuss acquisition of commercial property through an auction, which is becoming increasing popular, with bargains to be found.
In Part 2 of the book we will be discussing the areas which a small investor needs to understand if they are thinking of going it alone and, for example, investing in smaller retail units such as shops and offices. These areas encompass the nature of a business lease, legal ownership, rent reviews and the rights of landlord and tenant, service charges and repairs and maintenance. In addition, we will discuss the landlords right to repossess commercial property.
The book is wide ranging, designed to appeal to the smaller investor and highlights all of the relevant areas relating to property investment and ongoing management.
Steven Rimmer.
BUILDING UP YOUR COMMERCIAL PROPERTY PORTFOLIO
1
The Commercial Property Market-an Overview
Until relatively recently, the commercial property market has been the domain of the larger investor, such as institutional investors (pension funds for example) and also professional investors. This is because of the high capital outlay required and the levels of expertise needed. However, things have changed somewhat in the last few years and more and more individual investors are getting involved. This book, although outlining property funds and other funds which enable smaller investors to get involved in larger projects, also refers to the purchase of smaller units such as office blocks and retail shops which can be bought and managed by individuals.
There is about 760 billion of commercial property in the UK. This is far less than the overall value of residential property but still very significant nonetheless. The core sectors of commercial property, shops, offices and industrial units account for most of the market, about 80%. Around half of this is investment property which is rented to tenants by landlords. The remainder is mostly owned by occupiers, mainly private companies and also public sector and non-profit organisations.
Private investors
In the main, readers of this book will be those who are interested in investing privately in commercial property. Because commercial units require large amounts of capital, with the exception of smaller shops and offices, most private investment has been in residential buy-to-let. However, this has changed somewhat in the last few years and several different types of investment vehicles have emerged which enable the private investor to invest in commercial property. We will be discussing these further on in this book.
Property types
The three principal sectors of the commercial investment market are:
Retail (shopping centres, retail warehouses, standard shops, supermarkets and department stores)
Offices (standard offices and business parks)
Industrial (standard industrial estates and distribution warehousing, or logistical facilities.
There are also several smaller sectors such as leisure (parks, restaurants, pubs and hotels), student accommodation and healthcare properties. An overview of the main sectors reveals that London and the South East have the Lion s share of commercial property investments with retail property being more evenly distributed across regions than offices or industrial. Most towns have retail property of all sizes.
Commercial property-investment potential
Commercial property is an attractive investment proposition. However, it is very important to realise that the commercial property market is markedly different to the residential property market. Residential property investment has boomed in the last few decades as the ability of the smaller private investor to access the market has become easier. The main difference between the two markets are as follows:
Tenants in residential properties commit to relatively short leases, which are renewable. The typical tenancy of a residential property is for six months which is then renewable or can run on until brought to an end by landlord or tenant.
Commercial tenants usually sign long-term contracts, such as for ten years, with rent reviews, usually upwards.
Commercial tenants are normally liable for repairs to the property, while landlords of residential properties are usually responsible.
The returns from residential property come from both increase in capital value and also rental yield whilst the main income from commercial property is from rental income.
Commercial properties, with the exception of standard shops or smaller office blocks, usually cost significantly more to buy, particularly shopping centres or large office buildings.
The attractions of investing in commercial property
Because of the longer lease length the income from commercial property is more stable than residential property, with the average lease length being 10 years for retail property and seven years for industrial property. The yield is relatively high, on average 4.9% which is attractive in today s low inflation environment. Commercial property has outperformed other investments such as equities, gilts and cash deposits over the last three years and also over the longer term. We will be looking at various aspects of financing property and working out returns on investment in chapter 3 .
Value can be added to commercial property, as direct ownership gives the investor opportunity to manage their assets actively, either to sustain value or enhance it. Active management can include re-negotiating the lease terms of an existing tenant to increase the value, for example by increasing length of the lease or increasing rent payable. Premises can be refurbished thus increasing the value of the property or the property can be redeveloped for a different use (see chapter 6 on planning regulations).
The risks involved
Although there are a number of attractions there are also risks to be aware of when investing in commercial property.
Location
As with all property, location, location, location holds true. The siting of a building directly affects its value. A commercial property investment is likely to be held in the longer term and the attractiveness of its location can change over time, for better or worse. Factors that can change the attractiveness of a location can include area regeneration or the building of a large store nearby.
Physical characteristics of the building
The type and use (utility) of the building can affect its value. Type of building refers to what sort of building it is, office or shop. The utility refers to what type of benefits the occupier gets from the building. Things that affect