The fate of the high street and the fortunes of commercial property were in decline even before Covid-19. The effects of the coronavirus pandemic have only accelerated this descent. It is encouraging more commercial investors and property investment companies to turn their sights to residential property instead.
Better returns and more stability
Leading property management platform apropos state that commercial property investment companies can find better returns and more financial stability in the residential sector. They say this shift has already started to take place. This has been shown by the growth of the Build to Rent sector and the shift by major investors such as Legal & General to residential.
David Alexander, joint managing director of apropos, says that lockdown has definitely had a positive effect on the residential sector. It has leading to greater prospects for investors and property investment companies in residential rather than commercial property.
David explained; “All those months of lockdown seem to have made owners and renters more appreciative of the need to have a great place to live in. The result has been a boom in property sales and an unprecedented increase in activity in the private rented sector as people prioritise home life above everything else.
“The result is likely to be that individuals, property investors, and major institutions may start to feel that the returns from residential property investment offer similar returns to commercial property but substantially greater stability in the long run.”
Accelerated high street decline
Although the high street and commercial property have been in decline for some time; the coronavirus pandemic has accelerated its deterioration.
Factors that commercial property investment companies were struggling with before the pandemic – the increase of online shopping; the decrease of the casual dining sector; expensive commercial rents – were simply heightened with Covid-19.
The return of a busy high street and lucrative commercial property investments is unlikely. Lockdown has meant many people will continue to work from home. This has caused a permanent change in consumer consumption behaviour and a major long-term impact on the commercial sector.
David Alexander concluded; “People may not return to the high street any time soon, but they will always want to have a good home. I believe that we will see a shift in sentiment toward the residential market over the next few years, as uncertainty and instability takes its toll on commercial sector sentiment.”
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