If you are considering making an institutional investment in commercial property, it is vital you understand the legal benefits and hurdles that come with it.
While commercial property can be a lucrative investment, especially when it’s done with the pooled funds of an institution, it requires careful management in order to ensure optimal returns. Not to mention the security of knowing everything is legally sound, and all official procedures have been followed. This is where a specialist solicitor comes in.
Investors own £483 billion worth of commercial property in the UK (as of end 2015), which makes for a very competitive market. If you’re part of an institution considering a commercial property investment, contact First4Lawyers to talk for our specialist solicitors who can help you every step of the way.
What is institutional property investment?
This is where entities such as banks, mutual funds, and hedge funds, use pooled money to invest in large property, such as office, leisure, and commercial structures.
In the last 40 years, UK property investment has shifted towards institutional investors.
Vast swathes of property in the UK used to be owned by the Crown, the Church, central and local government, and wealthy individuals, but recent trends have seen institutional investors, private equity funds and overseas investors significantly increasing their share of property ownership.
Unlike stock market and commodity investments, commercial property provides investors with a tangible asset that is less vulnerable to currency fluctuations, making it an attractive market for many institutions, such as insurance companies and pension funds.
What are the benefits of institutional property investment?
Commercial property in the UK is a particularly attractive investment prospect for institutions because of the relatively long average term of lease contracts.
As an investor, you can take advantage of the fact that a commercial lease in the UK has an average term of seven years, and the fact that most contracts require that rent is reviewed every five years to ensure it is in line with market rates.
The predictability and reliability of commercial property rent makes this type of investment more attractive than equities and bonds, and the prospect of assured income growth is making institutional investment in commercial property increasingly popular.
What are the downsides of institutional property investment?
Commercial property has a much higher cost per unit than other forms of investment, and this can be obstructive to many potential investors.
Considerable funds are required for the development of a diverse commercial property portfolio, and many of the more profitable assets, such as shopping centres or offices in large city centres, are out of bounds to all but the largest of institutions.
However, specialist commercial property solicitors can help you to consider the options available to you and guide you on the legal side of making an investment of this type.
How can a solicitor help me with institutional property investment?
The commercial property specialists at First4Lawyers know all the legal ins and outs relating to buying and investing in property of all kinds. This makes them well placed to guide you on all the official procedures you need to complete the investment, and steps you should bear in mind.
It’s worth remembering your investment will create income returns via cash flow, as well as capital returns if your property’s asset value increases. Our solicitors can advise you on the legal side of those things and more.
Contact First4Lawyers and get your institution on the road to a successful property investment.