The Rise of Semi-Commercial Property
The semi-commercial property market is increasingly stepping into the limelight. According to a recent report, applications for semi-commercial properties have surged from 13% in 2023 to 24% in 2024. This substantial rise points to a clear shift among investors towards higher-yielding asset classes, mirroring trends we’ve seen at London Credit.
But what’s driving this momentum, and what do landlords, brokers, and lenders need to know?
Semi-commercial properties, combining residential and commercial spaces, offer a unique investment opportunity. Typically, these might be a shop with a flat above or a larger development blending retail, office, and residential elements. Their hybrid nature appeals to investors looking for diversity and stability. With income streams from two distinct sectors, semi-commercial properties reduce exposure to void periods, offering a level of financial insulation not always available in purely residential or commercial investments.
The rise in demand for semi-commercial properties is, in part, a response to growing challenges in the traditional residential buy-to-let market. Over recent years, landlords have faced mounting pressures, including reduced mortgage interest tax relief, additional stamp duty surcharges, and more stringent regulations. These hurdles have forced many to rethink their strategies, seeking investments that provide greater resilience and profitability.
Semi-commercial properties also come with potential tax advantages. For example, the commercial element often avoids some of the higher stamp duty rates applied to residential transactions. This dual advantage of tax efficiency and diverse income makes semi-commercial an increasingly attractive proposition for those seeking to expand their portfolios while adapting to the market.
A recent report underlines this trend, highlighting how landlords are leveraging semi-commercial properties to maintain profitability in a tough operating environment. By spreading risk and tapping into growing demand for mixed-use spaces, investors are positioning themselves to weather market challenges and capture new opportunities.
For those looking to seize opportunities in the semi-commercial sector, bridging finance has proven to be a crucial tool. Offering speed and flexibility, these loans enable investors to secure properties quickly, finance renovations, or manage planning permissions, all while remaining competitive in a fast-moving market.
At London Credit, we’ve seen a noticeable uptick in demand for semi-commercial bridging loans, reflecting this growing market interest. Short-term finance provides an invaluable advantage, particularly in situations where acting swiftly can make or break a deal.
Consider an investor aiming to purchase a mixed-use property requiring refurbishment. Bridging finance allows them to acquire the asset, carry out the necessary works, and transition to a longer-term funding solution—all within a streamlined time frame. This strategy not only unlocks the property’s full potential but also paves the way for stronger rental yields or increased resale value.
While the fundamentals of bridging finance remain consistent with residential loans, semi-commercial properties introduce additional layers of complexity. From understanding commercial leases to accurately valuing properties with dual uses, working with an experienced lender can smooth out the process and ensure that potential hurdles are addressed proactively.
Brokers play an essential role in helping clients unlock the value of semi-commercial properties. By identifying opportunities and connecting clients with the right funding solutions, brokers can help landlords navigate this dynamic and rewarding market. Partnering with lenders who specialise in semi-commercial finance is vital. These collaborations allow brokers to offer tailored solutions that align with their clients’ goals. Demonstrating expertise in this niche not only builds trust but also strengthens broker-client relationships for the long term.
Brokers should also be aware of the nuances specific to semi-commercial lending. For example, understanding how different income streams affect valuations or being able to explain the intricacies of tax efficiency can significantly enhance the advice they provide. A well-informed broker is an invaluable asset for clients exploring semi-commercial opportunities.
Looking ahead, the semi-commercial property market is poised for sustained growth, driven by investor demand for higher yields and greater diversification. With interest rates stabilising and the prospect of future reductions on the horizon, short-term finance solutions like bridging loans will remain critical tools for those keen to capitalise on this expanding sector.
For landlords, semi-commercial properties represent a chance to diversify their income, achieve stronger returns, and adapt their portfolios to meet the demands of a shifting market. For brokers and lenders, the rise of semi-commercial properties presents an opportunity to deliver exceptional value through bespoke, innovative solutions tailored to the unique challenges and opportunities of this asset class.
Constantinos Savvides, Head of Underwriting at London Credit
