We often hear the term ‘commercial real estate’ being used – especially here at Boxpod.
If you are looking to be a knowledgeable owner or tenant of commercial spaces in the UK, there are several details that you should know about in the world of commercial real estate. With this essential knowledge, you can rest assured that you know what you need to know to be a successful commercial property landlord or tenant.
What is Commercial Real Estate?
The term ‘real estate’ is used especially in the USA and refers to property – whether you own it or are renting it. In this case, we are discussing ‘commercial real estate’, meaning that it refers to commercial property.
Residential property usually would refer to homes and houses, but commercial real estate refers to any commercial properties such as office spaces, warehouses, retail units, workshops, and the like.
According to Statista.com, “After Germany, the UK is the biggest commercial real estate market in Europe, valued at over 1.5 trillion U.S. dollars. Commercial real estate can encompass multiple property types with a focus on financial return and renting, such as industrial, office, retail, leisure, medical, hotel, and in some cases even the privately rented residential subsector.”
Different Types of Commercial Real Estate
In the world of commercial real estate, there are several different categories. These can include:
Industrial Property – Industrial property is a wide-ranging area of commercial real estate that includes many different spaces including many non-office-based businesses, storage, engineering, and manufacturing facilities. It can also include workshops that have been specially adapted to suit certain businesses.
Office Spaces – This includes a range of different offices with different styles and different organisational structures. Offices come in different shapes and sizes, from traditional single-tenant office spaces to modern open-plan offices to rent or buy, to shared offices where an office is shared between a number of different businesses and including managed or unmanaged offices.
Retail Spaces – The obvious retail space is a shop or store. However, ‘retail’ premises also cover any other spaces that welcome customers into the premises – including estate agents, solicitors, car garages, cafes, and food takeaway shops.
Healthcare – Commercial healthcare properties will normally account for properties such as cosmetic surgery premises and dentists. They will often be equipped with specialist equipment for the ability to carry out the work that is required by them.
Leisure – Commercial leisure property refers to property that is used for recreational purposes. This can include property that is used for gyms, cinemas, escape rooms, bowling alleys, or football pitches.
Mixed-Use – In terms of real estate, the category of ‘mixed use’ refers to a property that is used for both commercial and residential means. This could include, for example, a shop which is available for rent with a flat above it.
Although these are not legal terms or official classes (please see below), they are often used by estate agents to enable them to define the appropriate use for a particular commercial property.
The Town and Country Planning (Use Classes) Order 1987 (amended in September 2020) is an order that was brought in to ensure that a town can function properly with the correct proportions of properties, services, and amenities. Every property in the UK is assigned a class, whether it is a residential or commercial property, and this refers to the activities that are permitted to be carried out within the property.
If you own or are renting a commercial property, it is important that you know what its class is in. Some of these classes for commercial property include:
B3 – B7 Special Industrial Groups – used for the manufacture and processes of acids, animal by-products, chemicals, metalwork, mining, and quarrying.
B2 General Industry – Any other industrial manufacture and processing of materials that are not included above.
B8 Distribution and Storage – For the use of any storage or distribution of products.
E Commercial, Business, and Service – For the majority of commercial properties, including financial services, professional services, restaurants and cafes, offices, research and development premises, nurseries, medical premises, assembly, and leisure.
F1 Learning and Non-Residential Institutions – properties that provide education, public halls, libraries, art galleries, places of worship.
F2 – For leisure centres, pools, community halls, and skating rinks.
Sui Generis – Translated from Latin, with the meaning of ‘of its kind’. This category is for the things that do not fit into the other categories, such as nightclubs, petrol stations, launderettes, pubs, and bingo halls.
It is important to note that it is the responsibility of a commercial property’s landlord to ensure that the activities that are being carried out inside their commercial property match the class that it has been allocated.
What Happens if Something Goes Wrong?
One of the main differences between being a residential and commercial tenant is that if something goes wrong it will normally be up to you to fix it. In the case of a residential tenant, if there is a problem with the water, electricity, or other repairs, for example, the landlord would fix it. This is not usually the case with commercial property.
The warrant of habitability means that residential landlords must make sure that the property is liveable-in. However, this warrant is often not present in a commercial property contract. This does not mean, however, that the tenant does not have any rights. Landlords must still comply with the Landlord and Tenant Act 1954, for example.
Looking for Commercial Property?
Whether you are a tenant looking to rent a commercial unit or you are a commercial property landlord who wants to sell or rent out their property, here at Boxpod we can help to make that connection between the two of you.