We all think we know a bit about property I’m sure. After all, most of us live in one, whether it’s a studio flat in Wapping, a two-up, two-down in Kettering or a 25-bedroom mansion in the Scottish Highlands. With luck and a fair wind they should retain – and hopefully increase – their value over the long term. That said, we know that the value of property can go down as well as up.
Some people will own a second property – or even a portfolio of properties – which they let out to tenants, but few of us are in that position. Most of us don’t view our house as an investment, but as a place to live, and few of us earn any income from it – in fact most of us find that buying a house uses a high proportion of our income rather than contributing to it.
Over recent years, a growing number of us have also come to understand the potential of a different kind of property – commercial property – for example offices, shops and warehouses. Commercial property can offer a valuable opportunity to diversify an investment portfolio as it can play a key role alongside shares, bonds and cash.
As with any asset, there are risks involved. Capital values can rise or fall as demand for space goes up and down with the business cycle. The amount that tenants are willing to pay in rent will vary with their turnover. We have all seen empty shops on the high street and ‘To Let’ signs on office blocks as businesses have become victim to challenging market conditions. As with any asset, it is important to understand the fundamentals and to work with an expert adviser to understand how it might fit into your investment portfolio.