Commercial property yields outpacing their residential rivals

New research that analysed the performance across both the residential and commercial property markets to see how the two are currently comparing, has found that commercial property is providing stronger yields - particularly in the North East.

Related topics:  Landlords,  Yields,  Commercial,  Property Investment
Property | Reporter
16th March 2023
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"The strength of a bricks and mortar investment not only differs from one sector to the next but also depends on which region you look to "

The research, by peer-to-peer real estate investment platform, easyMoney, shows that currently across Britain, the average yield returned when investing within the residential sector is a respectable 4.1%. However, investing within the commercial property sector will see an average return of 6.5%.

Scotland is currently home to the highest average residential return on investment at 5.4%, with the North West (5.2%) also home to an average resi yield of above 5%.

In contrast, the average residential return being seen across the South East is the lowest of all areas of Britain at 3.7%.

However, when it comes to commercial property yields, the North East tops the table, with the average return being seen in the current market sitting at a lofty 9.1%, followed by Yorkshire and the Humber (8%).

London is home to the lowest average commercial yield in the current market at 4.6%.

Again, the North East and Yorkshire top the table when it comes to the gap between the average residential and commercial yield available in the current market, with a difference of 4.5% and 3.6% respectively.

The South East (3.1%) is also home to a gap of more than 3% between current resi and commercial yields, while London is home to the most balanced market with a difference of just 0.2%.

Jason Ferrando, CEO of easyMoney, says: “Whether buying a home for yourself, investing in the rental sector, or looking to the commercial space, property is one of the smartest investments you can make. But for the amateur and professional investor alike, knowing exactly where to invest can be a daunting task.

"As our research shows, the strength of a bricks and mortar investment not only differs from one sector to the next but also depends on which region you look to and some areas offer a greater balance between commercial and residential returns when compared to others.

"The key to investing successfully is often portfolio diversification and so it’s no wonder that many investors are opting for the peer-to-peer route when considering where best to place their money.

"In doing so, they are able to take advantage of far stronger rates of return, with their money gradually diversified across a range of bridge and development loans, for both residential and commercial developments.”

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