An industry survey by the Royal Institute of Chartered Surveyors (RICS) revealed upbeat attitudes towards commercial property.
Industrial property, data centres, care facilities for the elderly, and multifamily properties all maintained positive outlooks. Even office accommodation – which was in much less demand during the recent Covid pandemic – was thought to be essential for any company's successful operations.
Given the potential yields from an investment in commercial property, perhaps such enthusiasm can be understood.
Provided you take the necessary precaution of commercial landlords insurance; there may be clear indications for a profitable investment portfolio.
What is a commercial let?
If you're planning to invest in commercial property, you'll need to know what types of property this might entail. The Town and Country Planning (Use Classes) Order of 1987 defines five use classes for commercial property:
- Class B: General Industrial – which includes industrial units, workshops, and the like;
- Class C: Hotels and Residential Institutions – in addition to hotels and guest houses, this use class might also cover residential nursing and care homes, for example;
- Class E; Commercial, Business, and Service Uses – including shops, offices, and surgeries;
- Class F: Educational and Local Community – schools, colleges, sports, and leisure centres; and
- Class Sui Generis: Other Properties, including mixed-use commercial and residential properties (flats above a parade of shops, for instance).
What does commercial landlords' insurance cover?
In short, commercial properties come in an enormous range of types, sizes, and uses. For example, it could be a shop with a residential property above it or purely residential. It could be anything from a veterinary surgery to a warehouse.
Whatever the property, though, its protection relies on suitable commercial landlords' insurance – and the type of insurance will further depend on the type of commercial property in question.
You must arrange commercial property insurance that matches the nature and use of the relevant commercial premises. It would not be possible, for example, to use a residential landlord's insurance policy for a commercial let.
While the insurance needs of a large industrial plant will be quite different to those of a corner shop, for instance, there are typically elements likely to be part of the majority of commercial property insurance policies, namely:
At the core of the insurance is the protection of the structure and fabric of the building itself – against such potentially devastating events as fire, explosions, flooding, storm damage, impacts, thefts, and vandalism;
Any commercial premises are likely to have valuable contents – the plant and machinery of an industrial factory, for instance, or the stock in hand of a corner shop;
Loss of rental income
- if you invested in the commercial property to let to leaseholders or tenants, you would rely on the rental income that brings;
- if that income stream is interrupted by a severe insured event that leaves the premises temporarily unusable – and, therefore, unlettable – your commercial property insurance may provide for an element of compensation for such loss of rental income;
Property owner's liability insurance
- as the property owner, you bear a duty of care towards all those who enter the premises or are affected by its proximity;
- if any third party is injured or suffers property damage and holds you liable, you may be ordered to pay hefty compensation – against which property owner's liability indemnity insurance will provide protection.
Are there any optional elements of commercial property insurance that I may need?
A range of optional extras may be offered alongside your commercial property insurance. Your need for them will be determined by the property you own.
The premises ' shop window is a critical feature for any retail unit – such as those lining any high street. Cover against the plate-glass shop window's possible damage or breakages should be considered in this situation.
If the commercial premises you own are let to tenants, you might also want to consider the value of legal expenses cover – to help safeguard against costly disputes between you and your tenants.
What is commercial landlord's portfolio insurance?
If you own more than one commercial property, you might want to consider portfolio insurance to arrange cover for all the premises. This has the advantage of giving you just a single renewal date for the cover – avoiding the risk of forgetting to renew essential insurance for one of your properties and often can be a more cost-effective solution than insuring each property separately.
There are many different types of commercial properties. It comes in all shapes, sizes, and use classes – and typically represents a sound business investment with yields higher than residential let property.
Commercial property landlord's insurance offers an essential safeguard to help protect your investment – whatever the use of the commercial premises you own.