“I sold 160 apartments to buy shops and offices with higher yields”

Britain’s biggest landlords are selling their rental properties and pouring their money into business investments as part of a fresh bid to escape government repression.

Investors with large residential portfolios are abandoning traditional rentals to buy shops, restaurants, offices and construction sites. Simon O’Brien, of O’Brien Estate Agents, said the number of inquiries from individual investors in their 50s and 60s who are considering buying commercial properties to fund their retirement has increased by 50% over the past two last years.

Those investors are mostly buy-to-let landlords who have been burned during the pandemic, when tenants stopped paying rent during the eviction ban, Mr. O’Brien said.

The government’s regulatory crackdown — including proposals to scrap no-fault evictions — is another factor. Adam Stackhouse, of Winkworth estate agents, said that previously commercial units on the high street were bought and sold almost exclusively by pension funds, or very occasionally by a family office.

“Now, of my 10 most recent trades, six have gone to private bidders. They outbid the old school network of fund managers who are just too slow.

Paul Jackson, who spoke under a pseudonym, previously had a buy-to-let portfolio of 180 properties. The 65-year-old sold about 160 and turned to investing in commercial property combined with a few apartments.

“Buy-to-let has become much more difficult financially with government legislation; there were many more problems with its upkeep. Commercial ownership is so much easier,” Jackson said.

Today, he holds around £10million in business assets. Two months ago, Mr Jackson bought a mixed-use property in west London for £1.02million. The ground floor retail space is let to a local shop for £30,000 a year. On the first floor is an office space which rents at £13,200 a year and a flat at £14,400.

He intends to obtain planning permission to add three more apartments, which will bring the property’s total annual rental income to £104,000. He estimated the development work will cost £400,000 and raise the value of the property to £2.5million.

The trend for ordinary homeowners to invest in commercial real estate has become mainstream since the spring of 2021, Mr Stackhouse said. The shift is happening among investors with the top 10% of portfolios, he added.

Since the government cut tax breaks on rental property loans, many properties have gone into loss making. Today, owners are looking for bargains.

“They have seen high street shops close during Covid and seen how onerous commercial tariffs are strangling small businesses. These properties are good value for money right now,” Mr. Stackhouse said.