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3 property sectors that investors should target in the year ahead

This year has been a very bumpy road for commercial property investors, but despite notable headwinds, there are some bright spots to target in 2023 and beyond.

Where the next opportunities are in warehousing

Although the warehousing and logistics space has cooled recently, thanks to a potent combination of rising interest rates and a natural stabilisation in the use of online shopping services, as well as consolidation by operators, the sector continues to offer investors decent returns, with e-commerce remaining a significant and consistent trend.

The move by supermarket chain Lidl to open its largest warehouse in the country in Luton, investing £300 million, is a good indicator of the ongoing demand in this space. Critically, green sites are offering investors the best deals, with decarbonisation a must-achieve objective for sustainability conscious companies. That news stories are surfacing suggesting owners and investors are being held back from decarbonising estates by a combination of outdated regulation, complex leasing arrangements and older, less sturdy buildings is indicative of the direction of the market.

Is this the answer to city centre property investment woes?

As for other sectors that investors should target, it is telling that they are not headline markets. The city centre property space, including high streets units, has endured a hugely challenging year so far, but one potential solution presents a notable investment opportunity.

Despite the state of the economy, there remains a shortage of student accommodation and it is only set to grow in the years ahead, with one forecast putting it at around 450,000 beds by 2025. Key drivers include students returning to universities post pandemic restrictions and demand for high-quality digs.

Critically, it is new purpose-built accommodation that is expected to plug the gap, not least as a result of recently tightened regulation, so there is a question mark against converting older buildings. Nevertheless, this sector is growing and could prove a savvy option to counter the city centre property slump.

Is this property sector set to start grabbing the headlines?

The third property sector that represents a good opportunity for investors has also flown somewhat under the radar, overshadowed by the boom in warehousing and logistics and pushed down the headlines by decline elsewhere.

Like student accommodation, the life sciences space is a fast growing market. A notably regional market at present (the south east), although it is expanding, life sciences is bucking trends and is displaying significant growth in 2023.

Life sciences is a broad church, from biotech to pharma and digital tech, and demand for such services is increasing, with an ageing population a key driver. For investors, accelerating demand, a pronounced lack of existing facilities, longer-term tenants and a premium rental level should all be attractive.

Property investment and the role of your commercial lender

In a tough market, warehousing and logistics, student accommodation and life sciences all represent important opportunities for commercial property investors, but the challenges don’t end with identify where to spend. Accessing capital in the current climate is far from straightforward.

This is why it is vital that investors have the right commercial loan and mortgage lender. Given current conditions and the state of the borrowing environment, affordability, manageability and flexibility are essential and this is what a commercial lending partner should provide.

To find out more about A&T Business Associates services for commercial property investors, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.

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