The UK’s property landscape is evolving – and fast. If you’re an investor, you’ve probably noticed the winds of change. Increasingly, investors are shifting their focus from residential to commercial property, and it’s not just about seeking higher returns. It’s about navigating new rules, managing risk, and staying ahead in a shifting market.
A new report from German lender Handelsbanken lays it all out: nearly half (46%) of investors say they plan to grow their commercial portfolios, while just 17% are looking to expand their residential holdings.
So, what’s behind the big switch?
The Driving Forces: Regulation and Red Tape
A significant part of this shift stems from government policy changes aimed at rebalancing power between landlords and tenants. While the intention may be noble, the reality for landlords is added pressure, more compliance requirements, and rising costs.
Top concerns among investors include:
- The Renters’ Rights Bill, which would ban no-fault Section 21 evictions.
- The end of fixed-term tenancies, with a shift to a rolling model where tenancies automatically renew.
- Upcoming Energy Performance Certificate (EPC) regulations, requiring all rental homes to meet a minimum ‘C’ rating by 2030 – a costly upgrade for many.
For landlords with ageing housing stock or tight margins, these changes could be the final straw.
Is Commercial Property the Safer Move Right Now?
With all the new rules and red tape hitting the residential market, it’s no surprise investors are seeing commercial property as a more hassle-free option. From retail spaces to offices and warehouses, commercial lets often mean longer leases, more reliable business tenants, and less time spent jumping through regulatory hoops. It’s not just about less stress -it’s about better control and steadier returns.
And in a post-pandemic world where hybrid working, local shopping, and logistics hubs are reshaping demand, commercial property isn’t just surviving – it’s adapting and thriving.
Not All Doom and Gloom
Despite the challenges in the residential sector, not all investors are feeling negative. In fact, more than a third of those surveyed by Handelsbanken said they feel optimistic about the road ahead.
Chris Teasdale, a spokesperson for Handelsbanken, summed it up nicely:
“The results of this year’s report show an industry that still has plenty of optimism and potential, even in the face of uncertainty, challenge, and change. Whatever the wider economic backdrop, the good news is that this is still a sector with plenty of appetite for growth.”
What Should Investors Be Thinking About?
If you’re an investor weighing up your next move, here are a few things to consider:
- Revisit your EPC strategy: Do your properties need significant upgrades?
- Watch rental reform closely: The Renters’ Rights Bill could change the way tenancies work.
- Explore commercial opportunities: With fewer compliance costs and longer-term security, it could offer a better return on effort.
- Don’t overlook location: Whether it’s commercial or residential, location remains king – so assess local demand carefully.
Final Thoughts
It’s clear that property investors are being forced to adapt. Some are choosing to fight the tide in the residential sector, while others are changing gear and doubling down on commercial assets. Either way, the market isn’t standing still.
For those willing to evolve, there are still solid opportunities to be found – and perhaps even more so for those who embrace change rather than fear it.
