As 2016 is well underway and the fast-pace of the commercial property in London (and the UK) shows no signs of slowing down are there challenges to be faced in investing in a commercial property in London in the future?

A significant amount of commercial property investors approach the market with caution. With the crash of 2008-2009 it’s reasonable to expect confidence to waiver and whilst investment in commercial property in London continues what does the future look like for this area of the property market?

Commercial property in London: Should you invest?

• A boom and bust economy

Longer term UK economic trends are fairly predictable and we all know that ‘boom and busts’ is not a myth. The Bank of England’s recent warning on a potential new stock market crash, along with the plummeting price of oil has created nervousness in investment but it is unlikely that this will have an immediate negative effect on investment in the commercial property market in London. The question for investors is whether they can financially ride the rough with the smooth and can take the leap of confidence into a current market of uncertainty. Investing in commercial property can offer a means of making money beyond equities and bonds. When it comes to commercial property investment there are three main drivers of returns 1) Income from rent 2) Income growth as rents rise 3) The capital value of the building you have purchased which should increase over time.

• Overseas investment

There’s ongoing debate about the state of overseas investment. Significant economic pressures in China indicates that moving forward we could see a shift in the geographical areas investment is coming from but as a whole it appears that foreign investment will remain strong. It’s worth noting though that the 2017 Brexit referendum on EU membership is on the horizon and could throw hesitancy into the mix when it comes to companies and investors which could make foreign investors wary.

• Cyclical investments

Commercial and residential property is a notoriously cyclical investment. Prices can sky rocket overnight and the potential for an increase in interest rates could have a significant impact on this years’ commercial property investment in London.

• Office rental space

We touched on this in a previous blog – office rental space is still set to grow in 2016/17 although at a slower pace than previously. London postcodes in particular will still outperform the market in general. With improving transport links and the expansion of the cross rail, commercial property investment could see an increase in investment in newer areas including Kings Cross, Clerkenwell and London Bridge. Rents are set to rise significantly rise in these areas so a foot in the door now could see fruitful returns in the future.

Looking for investment advice for a commercial property in London? Ensure you carry out comprehensive research before you take the next step. If you would like to speak to an expert get in touch with our commercial property consultants by calling us on 0207 118 3456 on filling out our contact form and a member of the team will be in touch.