There is only one question in every investor’s mind, what is the next best thing to invest in? Be it the commercial market or the housing market in London, buyers and investors always have their eyes peeled for the next best investment. So, what should we expect from London’s commercial investment market in the second half of 2022? Here is what commercial property agents, London have to say.
Table of Contents
Covid-19 and the impact on the commercial market
The commercial estate market in London has always been popular among investors, both local and overseas. However, the Covid-19 pandemic had a devastating impact on the commercial market in London. For one, many businesses had to shut down their operations temporarily. In addition, most companies asked their employees to start working from home, which had a major impact on the market. Secondly, the uncertainty around the Covid-19 pandemic, due to the multiple ongoing variants of the disease, is not helping the investor’s confidence. In fact, while most experts are always looking to predict the next investment trend in the market, the uncertainty around Covid-19 is keeping new investors away from the commercial market in London, at least as of now.
Upgraded office spaces and remote working
Usually, big companies and multinational corporations sign long leases – in that case, landlords do not need to worry, at least not yet. However, as new constructions hit the market and the demand changes, landlords and investors will have to rethink their strategy. For example, as most people work from home, some commercial property owners are converting their properties into shared-work spaces. In contrast, others are working on renovations and redevelopment to create a better and bigger space. On the other hand, some investors choose to invest in fixer-uppers, where they take up a whole building, re-do it completely and upgrade all the amenities to create a world-class office space. In the future, as the supply increases and the negotiations get tougher, investors and landlords will need to make their office space stand out.
Retail properties and commercial spaces
Without a doubt, retail spaces were the most hit during the Covid-19 pandemic. Be it homeward stores or clothing stores, non-essential stores that were not allowed to operate during the pandemic were severely hit. However, according to the experts, we can expect shorter leases and flexible rental terms in the future, which will allow investors/landlords and tenants to work together better. Essentially, investors who can rethink their strategy, change their business models and invest in multi-use spaces and co-working spaces will be able to survive in the future.
Hotels and the hospitality industry
People have been sitting at home for months, just waiting for a change of pace and scenery. As borders open, the vaccine rolls out, and tourism picks up again, the hospitality industry will boom. Most experts feel that hotels with minimal exposure to large gatherings will recover the fastest, so boutique hotels and smaller hotels without conference rooms and meeting halls should do better than others. In 2020, the investment in UK hotels fell by a whopping 70 per cent, however as tourism starts to pick up and overseas investors start showing some interest in the UK commercial market again, hotels and the hospitality industry will start booming.
Warehouses and storage spaces
If one aspect of the commercial industry continues to do well during the pandemic, it is the warehouses and storage spaces. The first lockdown in the UK was very strict, and that is when retail businesses, e-commerce stores and distribution companies understood the importance of warehouses, as did investors and warehouse owners. In fact, 2022 was a record year for warehouses, so much so that the number of warehouse constructions doubled in 2022 when compared to 2020. Moreover, as online ordering becomes more popular, the demand for sizable warehouses in prime locations will continue to increase.
We need to keep in mind that London is known as a global financial hub, so many international companies and multinational corporations will pay high rents and high prices to have their headquarters in the capital. Therefore, investors do not need to worry too much about investing in the commercial market in London, as long as they make wise investments. Eventually, quality investments will always ensure a good return on investment.
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