Buy-to-let investors swtich to commercial property as landlord bashing takes its toll

Institutional and individual investors are starting to reject buy-to-let properties in favour of multi-use buildings as the UK’s high streets evolve post-pandemic.

In contrast to the punitive tax regime faced by residential landlords, entry costs are lower for multi-use buildings, with a reduced rate of stamp duty, explains Adam Stackhouse, head of development and commercial investment at Winkworth.

“They are very tax efficient during ownership and it’s a lower level of capital gains tax when you look to sell the property. There are also inheritance tax benefits as well,” he says.

Hybrid model

In the latest episode of the estate agent’s Property Exchange podcast, he says large offices will evolve into this more hybrid model, containing reduced office space, increased retail and potentially residential homes, because it’s the only way that developers can make their projects financially viable.

With continued working from home, people have got time to visit their high streets so there’s more demand for local retailers, according to Winkworth. Stackhouse adds: “Footfall across the high street has remained stable through the first two quarters of 2022, with food and drink remaining one of the most popular sectors, while people are going into clothing stores again because online retailers are charging for returns.”

Business rates

With a new government in place next month, Winkworth’s chief executive Dominic Agace tells the podcast that he wants to see a reduction in business rates.

“It seems odd that businesses are incentivised not to have a high street presence. We want to encourage local communities, independent shop owners, and small businesses.

They create pleasant environments, which is good for everyone, and we should be supporting them. Expensive business rates deter people from setting up on the high street, which is a shame.”