Commercial property investment Why invest in commercial property
Buying a house not only puts a roof over your head and provides financial security over the long-term, it can also be a good way to invest your money.
However, the financial crisis of 2007/08 saw many property investors to get their fingers burnt, illustrating that investing in property is not without risk.
Commercial property is an important asset class to consider as a way of spreading, or diversifying, risk in your investment portfolio. Generally, property isn't highly-correlated to other assets classes such as cash, fixed income (bonds and gilts) and equities, meaning that property values move independently of other assets and aren't typically affected by what's going on in the stock markets.
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Investing in commercial property - the options
There are a number of different ways to get exposure to property as an investment:
For private investors, direct investment in property means literally buying all of, or a share in, a property. For most people, this is not a practical way of getting exposure to the commercial property market.
Direct commercial property funds or 'bricks and mortar' funds
A more common way to invest in commercial property is through a collective investment scheme, such as a unit trust, Oeic or investment trust. These invest directly into a portfolio of commercial properties, such as supermarkets, offices and warehouses, which are otherwise inaccessible for smaller investors.
Indirect property funds
These are collective investment schemes that invest in the shares of property companies that are listed on the stock market. They do not have the same benefits of diversification as direct investment in property - as property shares can move up and down with stock markets.
Find out more: Different types of investment - learn more about different investment products and how to benefit from them
How to profit from commercial property investment
There are two principal ways for you to earn money from a commercial property investment:
- Income from renting to a tenant
- Capital growth from an increase in the value of the property
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- Fund supermarkets reviewed - our unique ratings for leading fund brokers
- How to buy a house - expert advice on finding and buying your new home
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