Scottish landlords looking beyond residential to commercial property in move that could revive high streets

Scottish landlords are diversifying their portfolios, with some seeking to reduce investment in “riskier” residential property in favour of commercial space in a trend that could breathe new life into high streets, a new report has found.

Shawbrook found that 23 per cent of Scottish landlords currently own some commercial property, and plan to invest in more. Picture: Jane Barlow/PA.

A quarter of Scottish landlords plan to add a further property to their portfolios in the next 12 months, with 15 per cent of the group saying they are planning to buy commercial property (including offices, retail space and manufacturing space) rather than residential, according to recent research from Shawbrook. The bank says landlords are looking for ways to diversify their assets and adapt their strategies to future-proof their portfolios in the midst of economic volatility and uncertainty in the property market.

It also found that 23 per cent of Scottish landlords currently own some commercial property and plan to invest in more, while 25 per cent don't currently own any but are considering putting capital in it. The reasons cited by both of these groups are led by wanting to diversify the property currently in their portfolio (55 per cent), followed by having observed increased demand for commercial property and wanting to capitalise on the opportunity (26 per cent), a desire to support their local community/enable business in the area (32 per cent) and seeing a lack of supply of quality commercial property for small businesses/tenants (16 per cent).

Of those Scottish landlords investing in, or planning to invest in commercial property, the types of property they were most interested in comprise office space (43 per cent), smaller retail space (24 per cent), larger retail space (22 per cent), industrial/ manufacturing space (43 per cent), and factories/distribution space (35 per cent).

A report published by property firm Colliers in August showed investment into Scottish commercial property topped £320 million in the second quarter. That followed a study revealed in June by property advisor CBRE Scotland stating: “There’s a real opportunity for investors looking at opportunities in Scotland, and we’re anticipating significant investment activity for our largest cities in the next few years.”

Shawbrook said that across the UK, 36 per cent of landlords said they have noticed the increase in demand for commercial property, and view it as a good investment opportunity. Emma Cox, MD of property at the financial services firm, said: “Fluctuating prices and high borrowing costs are hampering confidence in the residential property sector. As a result, landlords are looking for other ways to diversify their portfolios and cater for current demand. The increase in workers returning to offices and the evolution of local high streets are two examples of areas where landlords will be seeking opportunities to invest, and those who already own commercial properties will be looking to add more.

"Landlords could become the unsung heroes of the high street, with many planning to support their local communities by injecting new life into commercial properties and retail units. Commercial property is certainly a good prospect for those who have typically specialised in the residential market and are looking to adapt their strategies now or in the near future.”