Commercial property ''a low risk investment'' - commercial mortgages

26 February 2007

Commercial property offers a relatively low risk investment opportunity compared to residential properties, according to one expert.

With long leases and business customers likely to remain as tenants for long periods, the nature of commercial properties is such that investors can expect strong yields and guaranteed returns.

Figures from Investment Property Databank cited by the Financial Times reveal that average commercial property returns have been strong in recent years, reaching almost 18 per cent last year. Despite this being less than in 2005 and 2004, experts maintain that commercial property offers a low risk, lucrative investment opportunity.

Commenting on the benefits of investing in commercial property Duncan Gwyther, executive director of Morgan Stanley Quilter, explained the benefits of commercial property investment.

"If you are just looking for income there is not that much risk with commercial property," he told the Financial Times.

"Rentals have quite long leases, so unlike equities… income from commercial property should be stable."

It is thought that commercial investors could be set to increase rents in order to ensure strong yields following reports that returns have dipped over the past three years.