Investors have started buying up shops and offices in London rather than houses in order to turn a profit.

Winkworth reports that it has seen a surge of interest from those looking to boost their pension pots by targeting commercial property in the under £1 million market.

As more residential landlords sell up due to punitive tax and regulatory changes, the estate agent says pension fund investors are identifying low value commercial assets and utilising SIPPs (self-invested personal pension) to invest in retail and office space in Greater London.  

Winkworth’s head of developments and commercial investments, Adam Stackhouse (pictured), explains that investors can see increased tenant demand will deliver a decent yield, with potential for excellent capital growth as the market recovers.

Flurry

Speaking on the latest episode of Winkworth’s Property Exchange podcast, Stackhouse says it has seen a flurry of activity this month.

“The buying process involved means that SIPP investors do not go looking via auction houses/platforms,” says Stackhouse. “These investors are looking to bring real estate into their pension pots as quickly as possible as they reach the threshold for cash funds. It is diverse and stimulating with debt readily available, boosting their buying power and therefore potential yields.”

In some cases, offices are being bought to then rent back from the SIPP structure to avoid paying rent to a third party. “In other cases, such as retail, the mission is to secure a high-grade tenant and enjoy a decent yield,” he adds. “Tax breaks are a further key driver.”

Looking ahead, Winkworth’s chief executive Dominic Agace believes that the era of speculation and residential investment by select landlords is over. “

It’s all families and individuals looking to progress their lives, and that’s a needs-based journey. Applicants registering to buy a property so far this year is 16% ahead of this time last year. The demand is there.”