Investment making commercial sense

Oct 25 2007 by The Journal

THE North-East continues to promote its redevelopment and Mincoffs Solicitors LLP reports that the commercial property market in the area appears to be thriving, with many of its clients making the most of the opportunities available.

In recent years, the region’s improving infrastructure and diverse culture has captured the imagination of the public.

Most notably, the impressive regeneration of the Newcastle and Gateshead quayside area has proved successful in attracting further investment to the area and acting as a positive catalyst to the local economy.

Mincoffs identified a number of potential factors which may be influencing the change in tide from residential property investment into the commercial market. In particular, it identified the reduction of confidence due to the uncertainty in the residential buy-to-let sector.

Factors such as the rising interest rates and additional regulatory issues are both considerations which may be swaying people’s decisions about their investments.

Although opinion differs about the effect of the interest rate rises and the potential rental incomes in residential property in the area, it is clear there is an abundance of buy-to-let property available to rent, which has caused increased competition.

In terms of regulation, there have been recent and well-publicised changes affecting houses in multiple occupation and tenant deposit schemes, adding to landlords’ costs.

The collective effect of these factors may well result in investors deciding that commercial property is a more attractive alternative.

It is well known that residential property prices have increased considerably over recent years. The cost of commercial property has also generally increased but the high price of residential property has meant that now some smaller commercial property is becoming comparable.

Risk and expected return is the cornerstone of any investment decision-making and Mincoffs believes that this may well be the driver for further commercial property investment, given the uncertainty in the residential property sector and the gearing of the local area in terms of its facilities, including the healthy business community. The firm expects that investment in commercial property will continue to rise, at least in the short term.

When considering any investment, it is imperative that investors receive the appropriate financial advice for their individual circumstances and are realistic about the value of their investment. Although it is undoubtedly the case that property investment programmes on television have seduced many, investors should, more than ever, err on the side of caution and take advantage of experienced professional support.