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Anti_Claus

How Is Commercial Property Fairing

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I am in the process of setting up two businesses. One will lease the property and for the other the property is for sale. My business partner (3 of us altogether but only 2 with enough cash) and I are thinking of buying the property separately and renting it to our business.

The EA says they have an offer of 95k. We have offered 95k also and can complete sooner so they have accepted. The EA says rental would be around 7500 to 8000pa. The return would therefore be 7.9-8.4%. I am not very trusting of EA's but this one doesn't seem to be bullsh***in us as far as I can tell (e.g. bogus offer etc). I would like a way to find out tho.

Does this return sound reasonable? Anyone know how to find out what other commercial properties sell/rent for in a given location. Obviously we intend to rent it ourselves so no probs with finding a tenant initially. I still however don’t want to pay over the odds for a property as this will hit me in the future should the business fail (God forbid) and we then need to sell/let the property.

I have no idea with commercial property as to how overvalued it is currently. The problem is if we don’t buy the property then we can’t set up in it and the location seems very good.

I would appreciate any comments.

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Take professional advice from a chartered surveyor who knows the area.

Apparently commercial property is in a little bubble of its own. This is driven by the need for pension funds to find "safe" assets, which has led them into piling into property.

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Yeah: Wrong forum.

Cheers! How helpful. <_<

Take professional advice from a chartered surveyor who knows the area.

Apparently commercial property is in a little bubble of its own. This is driven by the need for pension funds to find "safe" assets, which has led them into piling into property.

Cheers (for real). Will do this. Any ideas roughly what this will cost. I will have to wait till Tue now to ring round for quotes

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I am in the process of setting up two businesses. One will lease the property and for the other the property is for sale. My business partner (3 of us altogether but only 2 with enough cash) and I are thinking of buying the property separately and renting it to our business.

The EA says they have an offer of 95k. We have offered 95k also and can complete sooner so they have accepted. The EA says rental would be around 7500 to 8000pa. The return would therefore be 7.9-8.4%. I am not very trusting of EA's but this one doesn't seem to be bullsh***in us as far as I can tell (e.g. bogus offer etc). I would like a way to find out tho.

Does this return sound reasonable? Anyone know how to find out what other commercial properties sell/rent for in a given location. Obviously we intend to rent it ourselves so no probs with finding a tenant initially. I still however don’t want to pay over the odds for a property as this will hit me in the future should the business fail (God forbid) and we then need to sell/let the property.

I have no idea with commercial property as to how overvalued it is currently. The problem is if we don’t buy the property then we can’t set up in it and the location seems very good.

I would appreciate any comments.

The return sounds perfectly reasonable if the rental is fair. Think about it like this. If you can borrow at 5.5%, an 8% yield gives you a fair margin.

The fact that you can still get returns like this in commercial real estate suggests it isnt in a bubble. Compare that with the 5% yields avaiable in BTL. Where would you rather invest your money?

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A number of estate agents specialise in commercial/industrial proprty as well as some agents having commercial and residential sections.

Buy your local newspaper and check out the commercial property listings in the for sale section, usually round by businesses for sale and houses etc. From there you can get the agents and their websites.

Also I have noticed that nethouseprices do cover commercial property transactions in my locality I assume this is nationwide, so you can find out what historical sold prices are from that.

This should then give you an idea as to how commercial property prices have been performing in your area.

From the above, you should be able to determine:-

What sort of rent you should be paying on the type of property you are looking at.

And roughly what is a fair price for the property.

Work out the yield on that and there you go, anything significantly greater than 5% is better than a building society account/isa's/premium bonds/ns&i.

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Thanks for replies.

It is a retail unit we are looking at. The yield does seem reasonable an better than my several BS regular savings account. My partner was against having a survey at done first and was happy to go with EA blurb. I on the other hand am more cautious and have talked him round to having one.

Does anyone have an idea as to the cost? It is a 2 storey premises of ~856 sq.ft.

EDIT Checked nethouseprices. Interesting info. Only one property sold recently and for a similar value (will have to have a look at it for interest). Others are from mid 04 and were quite a bit cheaper but don't know details eg sq ft etc. Again will have to have a look.

Edited by Anti_Claus

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Thanks for replies.

It is a retail unit we are looking at. The yield does seem reasonable an better than my several BS regular savings account. My partner was against having a survey at done first and was happy to go with EA blurb. I on the other hand am more cautious and have talked him round to having one.

Does anyone have an idea as to the cost? It is a 2 storey premises of ~856 sq.ft.

If its high street retail that would explain the high yield. High street retail rents are under pressure as trade moves to edge of town retail parks. Yields of up to 10% are possible for poor quality high street retail, while warehouse yields are can be as low as 5% reflecting better rental growth prospects. Do your home work and figure out what is happening in your local rental market.

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Have you thought about putting the property into a pension scheme with the rental also going into pensions with resulting tax relief?

Depends of course on long term aspirations and 95k may be too low to consider using this option.

Rental vs sq. footage hasnt changed much the past 5 years so dont expect rentals to increase much.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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