One-in-five landlords are considering diversifying into commercial property, according to research from Shawbrook.
In the midst of economic volatility and uncertainty within the property market, landlords are looking for ways to diversify their properties and adapt their strategies in order to future-proof their portfolios.
More than a third of landlords who are planning to invest in commercial property cited diversification as the key reason for doing so.
Those who already own commercial properties are also planning to expand further, with 35 per cent of landlords with commercial assets stating that they are looking to invest in more in the near future.
Those with larger portfolios are more likely to have already invested in the commercial space, though they are far from the only investors recognising the potential. Some 36 per cent of all landlords said that they have noticed the increase in demand for commercial property and view it as a good investment opportunity. In addition, a quarter of landlords believe there is currently a lack of good quality properties for businesses, indicating a possible need for development or conversion work.
Many landlords see the opportunity to branch into commercial property as a chance to support their local community (29 per cent) with many planning to invest in small (33 per cent) and large (30 per cent) retail space.
With hybrid working, more workers are outside of cities during the working week, meaning more opportunities for smaller businesses in towns and village centres.
Hybrid working has also prompted a re-evaluation of office needs, with many businesses looking for spaces that support the new ways of working.
Demand for office space has increased according to recent data from Rightmove and research from IWG found that half of businesses have opened offices and workspaces outside of city centres.
This has sparked landlords’ in this type of commercial investment, says Shawbrook.
Other types of investment that landlords are interested in diversifying into include industrial or manufacturing space, factories or distribution space.
Emma Cox, Managing Director of Real Estate at Shawbrook, says: “Fluctuating prices and high borrowing costs are hampering confidence in the residential property sector.
“As a result, landlords are looking for other ways to diversify their portfolios and cater for current demand. The increase in workers returning to offices and the evolution of local highstreets are two examples of areas where landlords will be seeking opportunities to invest, and those who already own commercial properties will be looking to add more.
“Landlords could become the unsung heroes of the high street, with many planning to support their local communities by injecting new life into commercial properties and retail units.
“Commercial property is certainly a good prospect for those who have typically specialised in the residential market and are looking to adapt their strategies now or in the near future.”