22 January 2021/ rent_commercial_property

What do I need to know about commercial real estate?

Find commercial property to rent at Realla

There’s a lot to learn about commercial real estate if you’re trying to become a savvy renter or investor. You might have heard industry jargon thrown around before, like property class and planning permission, without really understanding what it means. We’ve put together a guide of the top six things everyone should know about commercial real estate, regardless of which side of the market you’re on.

1. What is real estate?

Broadly, real estate refers to the buildings in our towns and cities. It’s split into two main categories: residential and commercial. The former refers to buildings designed to live in, while the latter covers anything that can be used for some kind of business purpose.

Real estate is a term that’s more commonly used in the US, meaning titles like estate agents and property management companies are probably more familiar to people in the UK. Over in the States, the term refers to ‘the land and any property that has been built on it’. Many people in the UK don’t actually own the land their property is on (also known as being a ‘freeholder’), meaning real estate here commonly refers to just the buildings.

2. What’s the financial impact of real estate?

It’s estimated that the UK’s real estate sector contributes a massive £100 billion to the economy every year – about 7% of the country’s GDP. More than 1.2 million people are employed across this far-reaching sector, in positions from construction workers and quantity surveyors to estate agents and lettings managers.

The UK’s commercial real estate market is currently the largest in Europe. There are more than 113,000 real estate businesses operating on our shores, generating a collective turnover of around £68 billion. Whether you’re interested in working with heavy industry specialists or retail gurus, there are property lettings companies catering to every market niche and even the most specific set of requirements.

3. What are the different types of commercial real estate properties?

The world of commercial real estate is broad and varied, but there are six key categories that most properties fall into. They are:

  • Office – This can cover traditional offices that are occupied by one tenant at a time and serviced offices that include upmarket facilities and extra perks like valet parking and cleaning. It can also refer to co-working spaces, where tenants pay to use the space and its facilities without having a set desk area.
  • Retail – As well as traditional shops, retail properties can also refer to offices for businesses that welcome customers in (such as estate agents or solicitors) and takeaway food premises like sandwich bars or cafés.
  • Healthcare – These buildings will generally have specialist facilities designed to be used by those running a healthcare business, which could range from a private dentist practice to a cosmetic enhancement clinic.
  • Industrial – This broad category covers any building that non-office-based businesses could use, including space for manufacturing, storage and engineering processes.
  • Leisure – Leisure can refer to anything from a bowling alley to a gym or cinema, and covers properties designed for recreation.
  • Mixed use – Some buildings are referred to as mixed use as the space is split between commercial and residential units (e.g. an apartment building with shops on the ground floor).

Each property type can cover a range of buildings and intended uses. For example, leisure could refer to a property that’s suitable for use as a:

  • Leisure centre
  • Cinema
  • Restaurant
  • Bar
  • Gym

These terms are different from property classes, which stipulate how a building is legally permitted to be used. Instead, they’re used by estate agents and real estate directories to give the investor or renter a better idea of what they’re suitable for.

4. What is a property class?

To make sure a town, city or village has a good mix of properties in the right locations, town planners assign each proposed building a ‘use class’. This legislation has been in place since the Town and Country Planning Order 1987 was implemented, and ensures each building has suitable occupants based on its location, structure and facilities.

In September 2020, the property use classes were altered to make it easier for developers to understand what they can and can’t do with their buildings. Now, they run from Class B to Class F and cover everything from shops to restaurants, schools and dwellings. Offices, for example, are just one of the permitted uses for a Class E property.

Property classes aren’t really something tenants need to worry about, as it’s up to the landlord to ensure they’re using their building in line with its permitted use. But if you’re curious, you can find out more about what each property use class means in our previous guide – ‘All classes of commercial real estate explained’.

5. Do commercial tenants have the same rights as residential tenants?

Commercial tenants don’t have quite as many rights as residential tenants, but you’ll still be protected by law in a number of areas. The main issue many commercial tenants have is that some of the givens of residential agreements are absent from commercial leases, such as the vital warranty of habitability. This means that a commercial landlord will not usually be responsible for tasks such as fixing leaks or ensuring there’s hot water, unless it’s stated in the contract.

However, commercial landlords must still obey the Landlord and Tenant Act 1954. You’ll be protected in a number of ways, including having the right to stay in your property until the end of your tenancy agreement. Commercial landlords in the UK are also required to make sure any gas or electrical appliances on the property are safe.

6. Where can I find excellent commercial properties in my area?

Looking for a commercial property in a specific area? Here at Realla, we’ve got thousands of properties to choose from. Use our search tool to narrow down properties by location, size, price, subcategory and more so you can find the ideal home for your business. Whether you’re looking for your first premises or making the leap to a bigger building, you’ll discover the right property at Realla.

Want to find out more about renting a commercial property? Check out our previous commercial property guides.