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More landlords investing in semi-commercial properties

Investors are increasingly buying semi-commercial properties – as applications with one lender have doubled in 2024 compared to 2023.

So far this year 24% of applications with mortgage lender Shawbrook have been on semi-commercial purchases, up from 13% in 2023.

The bank suggested that investors are focusing on higher yielding assets due to the market becoming less volatile in recent months.

Daryl Norkett, director of real estate proposition at Shawbrook, said: “Property investors are adapting to a higher interest rate environment with portfolio landlords taking the opportunity to grow their businesses with a wider range of assets.

“We’re already seeing this in the applications we’ve been receiving recently, with investors looking towards property types like HMOs, social housing, and semi-commercial properties that tend to offer higher rental yields than traditional single lets.”

“These opportunities are property specific but can be very attractive to investors. Semi-commercial properties in particular have the added benefit of having both commercial and residential space, meaning that landlords can enjoy higher yields with a mix of income streams.

“Those interested in exploring the semi-commercial market or diversifying their portfolios should speak to a broker to better understand their options.”

Looking into the kinds of properties landlords have invested in, 60% sought retail spaces with flats above. For small investors, many of these assets also come with future value generation potential through the use of permitted development rights to add residential units.

The South East in particular has been an attractive target for investors, with two-fifths (39%) in 2024 looking towards the region compared to a quarter (27%) in 2023.