Leading estate agent Winkworth is seeing a surge of interest from investors looking to boost their pension pots by targeting commercial property in the under £1m market.
As increased numbers of residential landlords are selling up as a result of punitive tax and regulatory changes, Winkworth’s commercial experts are seeing pension fund investors identifying certain commercial assets at a low point in terms of value and utilising SIPPs to invest in retail and office space in Greater London.
According to Winkworth’s Head of Developments and Commercial Investments, Adam Stackhouse, investors can see that increased tenant demand will deliver a decent yield, with potential for excellent capital growth as the market recovers.
Speaking on the latest episode of Winkworth’s Property Exchange podcast, Adam Stackhouse said: “These investors are targeting smaller, self-contained office spaces sub-£1m and retail opportunities in high footfall locations. We have seen a flurry of activity this month, with two deals agreed in the first week of January and with two more under offer.”
The deals focused on commercial and retail premises in the fashionable areas of Fulham Road, King’s Road and Shepherd’s Bush in West London.
Stackhouse explained: “The buying process involved means that SIPP investors do not go looking via auction houses/platforms. This is due to the complexity of setting up a SIPP in the first place. “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 purchased to then rent back themselves 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. Tax breaks are a further key driver.” Looking ahead over the coming year, according to Winkworth’s Chief Executive Dominic Agace, the residential property market is now driven by need, with applicants 16 per cent ahead so far this year, compared to this time last year.
He told the podcast: “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. The rule of thumb is that the residential property market doesn't stop for long. We have had some drama around a new government, and it's important to say that every time there's a political change, there always seems to be a bit of drama. Generally, the mood is to crack on with things. And from an individual's point of view, there is real wage growth. There is a reduction in costs. You know, in July 2023, it was 6.2% for a two year fixed mortgage. The two year fixed mortgage has moved to 4.45% so it's a very different environment now, with inflation down at 2.5%.”
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