Investing in Commercial Property in London: Where Do You Start?

London’s property market is in ruder health than ever, and it’s a great time for overseas investors to get involved before the opportunities dry up. For many, this means investing in hotels or residential properties, which are considerably less expensive than the riskiest, and most rewarding, investments in London: commercial properties.

The worst-case scenarios for Brexit haven’t come to pass, and commercial properties are more popular than ever with overseas investors looking to tie their money to a stable and trusted liquid asset. Commercial properties range from supermarkets and 5-star hotels to local restaurant franchises. Because of this, the barrier to entry is much higher than investment in residential properties, with most investors recommending at least 10 million pounds or more to get a real return on investment.

The most well-trodden route to commercial property is through one of the range of funds available or by investing in a listed real estate investment trust or Reit. Investors buy shares in a Reit, which delivers any additional rental income to shareholders within a tax-efficient structure. When you split the cost like this, you can solve two problems: breaking past the cost ceiling and and makes it a lot easier to sell the building, giving you a great liquid asset.

For those with more money to throw around, there are various syndicates (generally composed of 20 people, give or take) that provides a direct opportunity to invest. Nevertheless, it makes selling the property more difficult and trading with other syndicate members can be the only way to go sometimes. These syndicates usually have an entry point of £50,000 to £100,000.

Exchange Traded Funds, which mimic the actions of an index or market, are another way to invest. “Investing through ETFs allows investors to gain exposure to the characteristics of physical real estate while preserving the liquidity and ease of access of a Reit,” explains Manuela Sperandeo, head of iShares Emea specialist sales at BlackRock. “ETFs, with their ability to be bought and sold in small denominations throughout the day on exchange, give instant access to an asset class that is otherwise considered to be illiquid and with high barriers to entry.”

So why should you invest in commercial property, when it’s so risky and out of reach for many? The obvious answer would be that adding commercial properties to your portfolio diversifies it, providing a safety net in the event of a downturn in residential properties, like what happened in 2008.

London is still a good place to invest in for foreign investors, and adding some financial security to your portfolio can’t be harmful. In short, commercial investment’s benefits outweigh the costs. Knightsbridge Ventures are a new property investment company bringing fresh new investors into Europe and overseas.