Britain’s biggest landlords are selling up their rental properties and moving their money into commercial investments in a new bid to escape the Government’s buy-to-let crackdown.
Investors with large residential portfolios are ditching traditional rentals to buy shops, restaurants, offices and builders’ yards. Simon O’Brien, of O’Brien Real Estate agents, said the number of inquiries from individual investors in their 50s and 60s looking at buying commercial properties to fund their retirement has surged by 50pc in the last two years.
These investors are primarily buy-to-let landlords who were burned during the pandemic, when tenants stopped paying rent during the eviction ban, Mr O’Brien said.
The Government’s regulatory crackdown – including proposals to scrap no-fault evictions – is another factor. Adam Stackhouse, of Winkworth estate agents, said that previously high street commercial units were bought and sold almost exclusively by pension funds, or very occasionally a family office.
“Now, of my 10 most recent deals, six went to private bidders. They are outbidding the old school network of fund managers who are just too slow.”
Paul Jackson, who spoke using a pseudonym, used to have a buy-to-let portfolio of 180 properties. The 65-year-old has sold around 160 of them and switched to investing in commercial property combined with some flats.
“Buy-to-let became much more difficult financially with government legislation; there were a lot more problems with maintaining it. Commercial property is so much easier,” Mr Jackson said.
Today, he holds around £10m worth of commercial assets. Two months ago, Mr Jackson purchased a multi-use freehold in west London for £1.02m. The ground floor retail space is let to a local shop for £30,000 per year. On the first floor is an office space which lets for £13,200 per year, and a flat lets for £14,400.
He intends to get planning permission to add three more flats, which will bring the property’s total annual rental income up to £104,000. He estimated that the development works will cost £400,000 and will boost the value of the property to £2.5m.
The trend for ordinary landlords to invest in commercial property has become widespread since spring 2021, Mr Stackhouse said. The shift is happening among investors with the top 10pc largest portfolios, he added.
Since the Government cut tax relief on buy-to-let mortgages, many properties have become loss-making. Now, landlords are hunting for bargains.
“They watched high street shops get boarded up during Covid, and saw how onerous business rates are throttling small businesses. These properties are good value right now,” Mr Stackhouse said.
