We, at Sidney Phillips, are currently experiencing high demand for licensed properties – in particular those providing accommodation, despite the present state of the economy. Interest rates have consecutively risen for 14 months up to the current rate of 5.25%, which is the highest in 15 years. With increasing interest rates we would expect the market to suffer, with less investment in commercial property, however, there has not been a notable fall in either demand or prices for our listings.
Commercial property remains so resilient because it is versatile to changes in the market. This has been proven following the pandemic, despite the rise in the cost of living. The adaptability of this type of property remains a key strength as owners can easily adapt their business’s use and purpose to changes in customer demand. An example of this is the increasing number of gastropubs appearing as customers want good quality food at good prices, in a relaxed and comfortable environment.
Furthermore, with typically longer-term leases than residential property, freehold owners are provided with committed tenants, ensuring increased financial security with a stable and greater income. This enables higher rent than residential property fuelled by the opportunity for tenants to make profits. In this way, commercial properties can sustain appreciation of long-term value and have healthy cash flow positions, making them less reactive to the increasing interest rates we see now.
The industry continues to draw in first-time buyers, particularly those with management or chef experience seeking their own ventures. Currently we are seeing a particular interest in hotels and properties with letting bedrooms, especially in rural and semi-rural areas as buyers can profit from surrounding affluent villages. In the present economic market, there are numerous reasons for this increase in interest from vendors as the segment experiences huge consumer demand for British hospitality. Following the pandemic, the hotel industry showed its durability with its fast recovery and demand levels remained consistent throughout.
The resumption of business travel, weddings, and leisure travel has continued to boost demand for inns and hotels. Freehouses have a unique opportunity to diversify by providing letting rooms to benefit from more income security. Tenants can alter room rates to provide protection from rising inflation as they can be adjusted each day. Again, being flexible as a commercial property, hotels can adapt through branding and a change in management to encourage demand and ensure profit.
2024 hopes to bring even more positive news for the commercial property market where we expect to see a continued rise in the rental market for public houses and for free of tie leases. As well as further demand for properties with accommodation, including hotels, properties with rooms to let, campsites, and guest houses.
Call 01981 250333 for more information or visit www.sidneyphillips.co.uk