Commercial property owners have faced many challenges in recent years and now more than ever, they have been forced to adapt in order to survive. With the world potentially on the brink of a recession, the commercial property sector could be on the shaky ground whilst navigating through the uncertain times ahead.
Let’s examine some of the main challenges commercial landlords face and how they can make plans to minimise losses in this period of change.
What Challenges have the Commercial Property Sector Faced?
In the past few years, many commercial sectors have completely transformed thanks to changing consumer habits and working practices, and this has had a knock-on effect on commercial properties. A key example is the retail sector, which has struggled against competition from online retailers and as a result, left vacant units all over the British high street.
In addition, political instability with Brexit has furthered created an uncertain climate for the commercial property sector. This is even before we get to the elephant in the room – the ongoing Covid-19 pandemic which continues to have a massive impact on commercial properties.
Prior to the coronavirus pandemic the UK was suffering from a shortage of office space, with demand outstripping supply and many existing sites requiring considerable reinvestment. However, in April 2020 a government lockdown forced companies in the UK to quickly adapt their practices and continue their operations from home. Since then, business owners have remained cautious and many have delayed reopening their offices to their employees.
What Do the Experts Think?
Property experts have advised commercial landlords to “hold their nerve” in the event of an economic downturn. There may be a temporary dip in the market but they are positive about long-term prospects. Lessons have been learnt from previous cycles and commercial real estate in the UK has been operating more sustainably since the previous crash, making it robust enough to recover from the current crisis.
Furthermore, although some sectors have suffered (with retail as the main example), others have thrived during the coronavirus crisis. Industrial and logistics have remained in high demand during lockdown as many retailers and services have required additional space in order to serve their customers safely and effectively.
How Can Commercial Landlords Protect their Assets?
Commercial properties owners can overcome the challenges faced by adapting to market need and protecting their assets.
As discussed, the retail market is surviving in a different format. The strength of online retailers has resulted in a greater need for large distribution centres to ensure their logistics run smoothly. This trend demonstrates valuable investment opportunities for commercial landlords who may consider diversifying their portfolios to weather the storm.
In addition, they must also find ways to manage potential risks and the best way to do this is by finding the right insurance policy. Commercial property insurance policies, such as those offered by Arthur J. Gallagher, means landlords are covered for unoccupied properties, loss of rent and business interruption, for example if a property becomes uninhabitable and unable to let out.
In the current uncertain climate, tailored insurance is vital for commercial landlords. The Covid-19 crisis has moved quickly and guidance has changed on a regular basis. Although the government has now urged workers to return to offices and workplaces to aid economic recovery, local lockdowns are still a possibility if the pandemic worsens and commercial property owners must be prepared for all eventualities
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