The Rent Review Specialist
Commercial Property
Real Estate
The definition of 'property' encompasses more than just real property, also known as real estate, but in British usage, "real property", often shortened to "property", generally refers to land, buildings and fixtures, while the term "real estate" is used mostly in the context of probate law, (and means all interests in land held by a deceased person at death, excluding interests in money arising under a trust for sale of or charged on land.) In some situations, the correct use of the terminology is important, but for ease of understanding popular usage prevails; hence whenever I use the word property' and unless otherwise stated please assume I'm talking about land, buildings and fixtures.
Property Market (Real Estate)
The property market, sometimes known as "real estate”, comprises the human-made surroundings that provide the setting for human activity, ranging from individual buildings, to villages, towns and cities with supporting infrastructure.
Property is product that is constructed of human-made and/or natural materials: for example, stone, clay, brick, slate, timber, steel, plastic, etc. Building construction disciplines include architecture, civil engineering, building contracting, surveying, energy performance advisers, interior designers and so on. For purpose of this website, the definition of property includes undeveloped land and parts of the building.
A property can last for years - built in the 1130s the Manor at Hemingford Grey is one of the oldest continuously inhabited houses in Britain and much of the original house remains intact; in Herefordshire, Hellens Manor was granted in 1096 and is a living monument to much of England's history - but whilst there are many ancient properties around the country still standing and in regular use, the notable building booms include the Tudor period (1485-1603) (on vast tracts of land following dissolution of the monasteries); Elizabethan (1533-1603) (early Renaissance); Georgian (1720-1840); Regency early-19th century; Victorian (1827-1901) with expansion brought about by the Industrial Revolution, railway network, trams; Edwardian (1901-1918), and particularly in Greater London and provincial cities, during the 1930s, 1950s, 1970s-2000s, and the present day.
The individual character and street-scape of cities, towns and villages is personified by the dominant architectural styles and age of their properties. There is also sometimes a marked difference between the public sector and private sector properties, particularly in residential property. During the 1920s and 1930s, the demolition of old 'slum' properties and the moving of tenants onto new Council estates led to the construction of large tower blocks of flats for social housing. The development and expansion of towns and cities is reflected in the story of shopping throughout the ages.
The main attraction of the UK property market, particularly for overseas investors, is its organisation, sophistication and transparency: the choice of property available, the supply of buyers and the legal and property valuation system; also the UK is well served by domestic and international banks, creating a competitive environment for funding.
Although many reputable organisations carry out research into the state of the property market at any time, in fact there is no single property market as such. Since property is an illiquid asset, the market value of each property depends upon much the actual buyer would pay and saleability upon finding one buyer to become the legal owner (albeit the actual buyer is not necessarily just one person or entity). So, when you invest in the property market, it is wrong to try to assess the direction of the market as a whole, there is no level playing-field: property is not homogeneous, everything that can be known about a particular property is not necessarily available, all buyers and sellers do not have complete information on the prices being asked and offered in other parts of the market, barriers to entry or leaving are restricted.
The property market is not a ‘perfect’ market, and that is just as well, because the purpose of a perfect market is not to make profits, but to efficiently allocate resources. In a perfect market, profit is a sign of inefficiency, whereas in an imperfect market, profit arises in direct proportion to the imperfections. In a perfect market, there is a large number of buyers, a large number of sellers, the quantity bought by any individual so small relative to the total quantity traded that individual trades leave the market unaffected; the product is homogeneous (the same property for all buyers and sellers), all buyers and sellers have complete information on the prices being asked and offered in other parts of the market; and there is perfect freedom of entry to and exit from the market.
Although property transactions are independent of one another, the legislation, rules, regulations and the interpretation of transactions between owners/vendors (sellers), purchasers (buyers), landlord and tenants, and mortgagees, comes under property law, an area of law that governs the various forms of ownership in real property (land and immoveable property).
Property is product that is constructed of human-made and/or natural materials: for example, stone, clay, brick, slate, timber, steel, plastic, etc. Building construction disciplines include architecture, civil engineering, building contracting, surveying, energy performance advisers, interior designers and so on. For purpose of this website, the definition of property includes undeveloped land and parts of the building.
A property can last for years - built in the 1130s the Manor at Hemingford Grey is one of the oldest continuously inhabited houses in Britain and much of the original house remains intact; in Herefordshire, Hellens Manor was granted in 1096 and is a living monument to much of England's history - but whilst there are many ancient properties around the country still standing and in regular use, the notable building booms include the Tudor period (1485-1603) (on vast tracts of land following dissolution of the monasteries); Elizabethan (1533-1603) (early Renaissance); Georgian (1720-1840); Regency early-19th century; Victorian (1827-1901) with expansion brought about by the Industrial Revolution, railway network, trams; Edwardian (1901-1918), and particularly in Greater London and provincial cities, during the 1930s, 1950s, 1970s-2000s, and the present day.
The individual character and street-scape of cities, towns and villages is personified by the dominant architectural styles and age of their properties. There is also sometimes a marked difference between the public sector and private sector properties, particularly in residential property. During the 1920s and 1930s, the demolition of old 'slum' properties and the moving of tenants onto new Council estates led to the construction of large tower blocks of flats for social housing. The development and expansion of towns and cities is reflected in the story of shopping throughout the ages.
The main attraction of the UK property market, particularly for overseas investors, is its organisation, sophistication and transparency: the choice of property available, the supply of buyers and the legal and property valuation system; also the UK is well served by domestic and international banks, creating a competitive environment for funding.
Although many reputable organisations carry out research into the state of the property market at any time, in fact there is no single property market as such. Since property is an illiquid asset, the market value of each property depends upon much the actual buyer would pay and saleability upon finding one buyer to become the legal owner (albeit the actual buyer is not necessarily just one person or entity). So, when you invest in the property market, it is wrong to try to assess the direction of the market as a whole, there is no level playing-field: property is not homogeneous, everything that can be known about a particular property is not necessarily available, all buyers and sellers do not have complete information on the prices being asked and offered in other parts of the market, barriers to entry or leaving are restricted.
The property market is not a ‘perfect’ market, and that is just as well, because the purpose of a perfect market is not to make profits, but to efficiently allocate resources. In a perfect market, profit is a sign of inefficiency, whereas in an imperfect market, profit arises in direct proportion to the imperfections. In a perfect market, there is a large number of buyers, a large number of sellers, the quantity bought by any individual so small relative to the total quantity traded that individual trades leave the market unaffected; the product is homogeneous (the same property for all buyers and sellers), all buyers and sellers have complete information on the prices being asked and offered in other parts of the market; and there is perfect freedom of entry to and exit from the market.
Although property transactions are independent of one another, the legislation, rules, regulations and the interpretation of transactions between owners/vendors (sellers), purchasers (buyers), landlord and tenants, and mortgagees, comes under property law, an area of law that governs the various forms of ownership in real property (land and immoveable property).
Commercial Property
The economy is the wealth and resources of a country or region, normally in terms of the production and consumption of goods and services. In England and Wales, the commercial property market is a major sector of the economy and provides the physical accommodation for almost all industries, places of work, shopping and leisure. As an asset class, the ownership of commercial property is a significant investment for the pensions industry.
In common with residential property, commercial property is transparent, with an established legal framework and recognised valuation system. However, unlike residential property, the commercial property market is largely unregulated. Commercial property is predominantly a business-to-business market, where the legal relationship between landlord and tenant is based upon a commercial contract, (popularly known as a 'lease'). With a commercial contract the parties are deemed to know what they are doing.
The commercial property market is largely self-regulating. The majority of advisers are qualified, answerable to professional organisations and codes of conduct. A Code for Leasing Business Premises has been drawn up and which although voluntary (if only through fear of political intervention) is generally adopted by major landlords. Occupiers too have various representative bodies such as the Property Managers Association and the British Retail Consortium. And, although the value of the commercial property market has been estimated at £700Bn, of which approximately half is owned by occupiers and the remainder by investors/landlords, the number of different advisers and active participants in the market is relatively small so that in itself serves to keep things in order.
Unlike residential property, where transactional attitudes revolve around personal life-style and aspiration, in the commercial property market the relationship between occupiers (including tenants) and property is inextricably linked to marketing. Whether owner-occupier or tenant, the property is intended to complement the corporate image of the business of occupier or tenant at the date of the commitment.
A corporate image is the public face of a business: often the generally accepted image of what the company stands for, it is a form of promotion to suggest a mental image to the customer; and generally where a company is concerned about image, the company will often spend a considerable amount of money and time to ensure the overall standard of presentation. [A corporate image is not just tangible, it also includes intangibles: for example, how it treats employees, customers, suppliers and advisers, and anyone connected with the business, including landlords. For many businesses, the required property will include a style of architecture, layout and design; and for retailers, a feature of the retail sector is the trading position, including the impact of any changes in the locality on the tradition position.]
Commercial property continues to evolve. Unlike residential property where architectural styles and fashions of the time can come under the heading of 'heritage' to be preserved at all cost, and as listed buildings, commercial properties that have reached the end of their useful life or where the size, layout and configuration is obsolete are more likely to be refurbished or demolished and redeveloped, unless of historic importance. Even then, it is possible the external facade would be preserved, whilst all the innards stripped out and rebuilt to modern standards. Consequently, the age and construction of the property might not considered that significant between landlord and tenant because any onerous obligations for repair, maintenance and decoration could be circumvented by the provisions of a tenancy.
The commercial property market encompasses all property that is used or could be used for a business purpose. The business does not have to have a profit motive, but a fine-line exists between a hobby and a business. In the Landlord and Tenant Act 1954 Part II, one of the statutes governing tenanted commercial property, the definition of “business” includes a trade, profession or employment and any activity carried on by a body of persons corporate or unincorporate. That definition has been held to cover a sports club, but not to extend to a Sunday school as a spare time activity in the tenant's home, and taking in a few lodgers has been held to be outside the definition. Also, the premises need not be the place where the business is carried on. Although commercial property excludes residential property in itself, it is by no means unusual residential property to form part of commercial premises and so be subject to the law relating to commercial property and business tenancies.
The commercial property market is everything that is not residential or agricultural. Retail or shop property is a sector of the commercial property market and all buildings that are used or could, with planning permission, be used for any type of retailing including retail warehouses, retail showrooms, restaurants and financial and professional services and that fall into Class A of the Town and Country Planning (Use Classes) Order 1987 (as amended) are in the category of shop property.
In common with residential property, commercial property is transparent, with an established legal framework and recognised valuation system. However, unlike residential property, the commercial property market is largely unregulated. Commercial property is predominantly a business-to-business market, where the legal relationship between landlord and tenant is based upon a commercial contract, (popularly known as a 'lease'). With a commercial contract the parties are deemed to know what they are doing.
The commercial property market is largely self-regulating. The majority of advisers are qualified, answerable to professional organisations and codes of conduct. A Code for Leasing Business Premises has been drawn up and which although voluntary (if only through fear of political intervention) is generally adopted by major landlords. Occupiers too have various representative bodies such as the Property Managers Association and the British Retail Consortium. And, although the value of the commercial property market has been estimated at £700Bn, of which approximately half is owned by occupiers and the remainder by investors/landlords, the number of different advisers and active participants in the market is relatively small so that in itself serves to keep things in order.
Unlike residential property, where transactional attitudes revolve around personal life-style and aspiration, in the commercial property market the relationship between occupiers (including tenants) and property is inextricably linked to marketing. Whether owner-occupier or tenant, the property is intended to complement the corporate image of the business of occupier or tenant at the date of the commitment.
A corporate image is the public face of a business: often the generally accepted image of what the company stands for, it is a form of promotion to suggest a mental image to the customer; and generally where a company is concerned about image, the company will often spend a considerable amount of money and time to ensure the overall standard of presentation. [A corporate image is not just tangible, it also includes intangibles: for example, how it treats employees, customers, suppliers and advisers, and anyone connected with the business, including landlords. For many businesses, the required property will include a style of architecture, layout and design; and for retailers, a feature of the retail sector is the trading position, including the impact of any changes in the locality on the tradition position.]
Commercial property continues to evolve. Unlike residential property where architectural styles and fashions of the time can come under the heading of 'heritage' to be preserved at all cost, and as listed buildings, commercial properties that have reached the end of their useful life or where the size, layout and configuration is obsolete are more likely to be refurbished or demolished and redeveloped, unless of historic importance. Even then, it is possible the external facade would be preserved, whilst all the innards stripped out and rebuilt to modern standards. Consequently, the age and construction of the property might not considered that significant between landlord and tenant because any onerous obligations for repair, maintenance and decoration could be circumvented by the provisions of a tenancy.
The commercial property market encompasses all property that is used or could be used for a business purpose. The business does not have to have a profit motive, but a fine-line exists between a hobby and a business. In the Landlord and Tenant Act 1954 Part II, one of the statutes governing tenanted commercial property, the definition of “business” includes a trade, profession or employment and any activity carried on by a body of persons corporate or unincorporate. That definition has been held to cover a sports club, but not to extend to a Sunday school as a spare time activity in the tenant's home, and taking in a few lodgers has been held to be outside the definition. Also, the premises need not be the place where the business is carried on. Although commercial property excludes residential property in itself, it is by no means unusual residential property to form part of commercial premises and so be subject to the law relating to commercial property and business tenancies.
The commercial property market is everything that is not residential or agricultural. Retail or shop property is a sector of the commercial property market and all buildings that are used or could, with planning permission, be used for any type of retailing including retail warehouses, retail showrooms, restaurants and financial and professional services and that fall into Class A of the Town and Country Planning (Use Classes) Order 1987 (as amended) are in the category of shop property.