Commercial property is often pitched as the grown-up cousin of residential investment — more stable, more lucrative, and less emotionally messy. But is it really the golden goose of your portfolio, or just a shiny trap with a leaky roof and a long lease?
Let’s unpack the hype, the headaches, and the hard truths.
The Case for Commercial: Why It Could Be Brilliant
First, the good news. Commercial property can offer higher rental yields, longer lease terms, and less hands-on management than residential lets. Tenants are usually businesses, not individuals — which means fewer emotional dramas and more predictable contracts.
A well-placed office, warehouse, or retail unit can generate 6–12% annual returns, especially if it’s in a growth area or tied to a long-term lease. And unlike residential tenants who might move every year, commercial tenants often sign up for 5–10 years, giving you stability and fewer void periods.
There’s also the tax angle. Commercial landlords can claim capital allowances, deduct mortgage interest, and depreciate the asset — all of which can soften the tax blow and boost net returns.
The Pitfalls: Where the Fancy Turns Frightening
Now for the reality check. Commercial property isn’t a fruit machine that pays out every time you press the button. It’s more like a chess game — strategic, slow-moving, and occasionally brutal.
Vacancy risk is real. If your tenant folds or moves out, it can take months — even years — to find a replacement. And during that time, you’re still paying business rates, insurance, and utilities. Unlike residential property, where demand is usually steady, commercial demand can swing wildly with the economy.
Then there’s market volatility. Retail units on high streets? Risky. Office space post-pandemic? Still uncertain. Industrial units and logistics hubs? Hot right now — but trends shift. If you buy into the wrong sector at the wrong time, your “investment” becomes a liability.
And let’s not forget upfront costs. Commercial property often requires a bigger deposit, higher legal fees, and more complex due diligence. You’ll need surveys, asbestos checks, EPCs, and possibly planning consultants — all before you even get the keys.
ROI: Real or Imagined?
Return on investment (ROI) in commercial property depends on three things: location, tenant quality, and lease terms. A prime unit with a blue-chip tenant on a 10-year lease? Gold. A tired shopfront in a declining town with a startup tenant? Risky.
You’ll need to calculate net yield (after costs), factor in capital growth, and consider exit strategy. Can you sell easily? Will the market support your asking price? Is the asset future-proof — or will it be obsolete in five years?
So, Is It Worth It?
Commercial property can be a powerhouse — or a money pit with a glossy brochure. The difference lies in due diligence, realistic expectations, and a willingness to play the long game.
If you’re sourcing properties for charities or small businesses, like Fenton and Scott, the investment isn’t just financial — it’s social. You’re helping organisations access space they couldn’t otherwise afford. That’s impact with integrity.
But if you’re investing for profit, treat it like a business. Run the numbers. Know the risks. And never buy a building just because it looks “cheap” — it might be priced that way for a reason.