“Is residential property still worth it?”
I know that’s what many residential investors have been asking themselves recently.
Questioning whether their long-term strategy actually stacks up, or if it’d just be easier to stick their cash in an index fund and hope for the best.
And let’s face it, while most landlords would agree that it is still worth it, the increasing burden of compliance, coupled with growing challenges such as the Renters' Reform Bill, has transformed property investing from a rewarding side hustle into a full-fledged business with substantial obstacles.
However, while residential landlords grapple with 175+ rules and regulations, commercial property investment may offer a simpler, more profitable, and less stressful alternative.
I know this for a fact because I’ve been involved in commercial property for the best part of 25 years—having spent a large part of my career acquiring and managing commercial property for companies like Boots, CBRE, and Hammerson.
It wasn’t until 2016, however, that I decided to start my own consultancy and begin building my own portfolio of commercial property investments—which has grown from £10,000 in cash to a £3 million commercial portfolio (leveraging other people’s money).
In this article, I’ll share why commercial property could be the best option for you to diversify your investments—and why the common misconceptions about commercial property shouldn’t hold you back from getting started.
It’s no secret that recent changes in the residential property market have made it harder than ever to succeed as a landlord.
The Renters' Reform Bill has introduced stricter tenant rights, no-fault evictions are being phased out, and rent arrears recovery can take up to nine months due to court delays—a number that’s not likely to go down any time soon!
Add the government’s digital “Bad Landlord” database and increasing penalties for non-compliance, and the landscape looks more challenging by the day.
For landlords aiming to keep costs down, avoiding rent increases to retain tenants might seem like a sensible move. However, with rising operational expenses, this strategy often sacrifices profitability.
One residential landlord I spoke with hasn’t increased rents for five years, essentially running their properties as a charity rather than a business.
As investors, we have to ask:
“Does it make financial sense to continue in a sector where the costs, rules, and time burdens outweigh the returns?”
For many, the answer is “no.”
Commercial property offers a radically different experience for investors. Unlike residential properties, where the landlord handles nearly everything, tenants in commercial leases usually assume responsibility for maintenance, repairs, and property upkeep.
I know that for my clients—many of whom are former residential landlords—this alone has been an absolute game-changer!
And here are some of the other key differences that make commercial property stand out:
Residential landlords contend with over 175 laws and regulations, from energy standards to tenant eviction rules. In contrast, commercial leases come with just a handful of obligations:
Provide "quiet enjoyment" of the property (i.e., don’t disrupt the tenant’s use).
Arrange building insurance (with the cost recharged to the tenant).
Offer building services, if applicable, via a service charge (again, at the tenant’s expense).
This lower regulatory burden means less administrative hassle and reduced legal risk, making commercial a compelling alternative—particularly for more ‘hands-off’ investors.
Recovering rent arrears is notoriously slow in residential letting. But with commercial property, landlords have quicker, more cost-effective options:
Drawing down from rent deposits, which are held directly by the landlord and require no consultation or negotiation, as terms are documented in the tenant lease.
CRAR (Commercial Rent Arrears Recovery): A 21-day process involving notices and bailiffs, often resolved within 14 days using just the initial letters.
Repossessing the Property: If rent remains unpaid, landlords can change the locks and re-let the property, usually within days.
Needless to say, these remedies can save inordinate amounts of time, money, and stress, compared to the painful nine-month ordeal of recovering rent arrears in residential lettings.
Any seasoned investor will know that, in residential lettings, rent increases are subject to tenant challenges and market conditions.
In commercial leases, however, rent reviews are typically built into lease agreements, often linked to inflation or set at fixed increments.
This ensures steady income growth and helps preserve your property’s value over time—without any of the hassle you may be used to.
The commercial property market offers some exciting opportunities, especially with everything going on in today’s economic climate.
Here are some of the benefits you may not know about:
Commercial property investors can take advantage of capital allowances, reducing taxable income by offsetting the costs of items such as lighting, heating, and air conditioning systems, claiming between 20-30% of the purchase price on average.
Additionally, unlike with residential property, you have the option to invest directly through your pension, providing a tax-efficient way to grow your portfolio.
Recent budget changes have made residential buy-to-let less attractive, with stamp duty surcharges for investors rising to 5%. In contrast, commercial property has remained relatively unaffected, maintaining its appeal as a lucrative alternative.
There’s a common misconception that investing in commercial property means you need to go out and buy a big warehouse or prime office building.
But commercial property actually offers a whole range of asset types to suit various investment strategies—from multi-let retail units and offices to industrial warehouses and mixed-use developments.
And this kind of diversification can help you to mitigate risk and stabilise income—something I’m sure most of us wouldn’t say “no” to!
Case Study: A Struggling Buy-to-Let Landlord's First Commercial Property Deal
If you’re ready to explore commercial property, I’ve got good news!
Despite what a lot of people think, you don’t need millions to get started.
Small retail spaces, industrial units, and serviced offices can provide an affordable entry point, often delivering higher yields than traditional buy-to-lets. And while the funding options can differ from residential investing, there are still many options available!
But before you make your first step, consider these 3 tips:
Understand the Market: Research local demand and trends. For example, while some people believe that high-street retail may be struggling, the opposite is actually true in many high streets nationally.
Know Your Tenant: Businesses differ from residential tenants in their priorities and behaviours. Understanding your tenant’s needs can lead to longer leases and fewer vacancies. They also work business hours, which means you do too!
Leverage Professional Advice: Work with a commercial property agent or consultant to identify opportunities and negotiate favourable lease terms.
The Next Step: Learn More
To help you navigate the transition from residential to commercial property, I’ve created a free guide that covers everything you’ll want to consider, so you can make an informed decision.
Scan the QR code below or visit to access it instantly.
For further advice or to discuss your investment strategy, feel free to contact me at kirsty@kdcommercial.co.uk. I’m here to help you survive, thrive, and make your next big move into commercial property.
