Maintained by Gene Rici

The holiday buzz

Imagine if you were on holiday. It is a time to break away from the usual cycles in your life, to do something new, or to have a different experience away from what might seem like the daily drudgery of things. You are physically away from work, so yes, there is a break from routine. Perhaps you might be relaxing by the pool on a sun lounger – the physical environment would be different, and not just because of the buildings, but maybe the warmer weather might seem a long way away from home. You don’t have your usual work colleagues with you. Everything seems different, which is nice because it allows your mind a new experience, recharging it, so that you are back to the usual routine your batteries have been recharged.
Then what else happens? You pick up your phone and check for emails and social media updates.

It is a matter of opinion of course, but doing these latter things are rather silly. And why is this blog of the opinion so? It is because activities such as checking emails and social media updates are negative experiences and breed dependency. Look at it this way. When they work, you end up checking your updates at a frequent interval – this differs from individual to individual – and this can range from being perceived as dependent or obsessive. But what happens when they don’t work? Your obsessiveness is transferred to checking for internet connections and waiting for the precise moment everything kicks in. Or if there is an outage, you feel depressed for hours while your cortisone levels are heightened and you feel stressed. On holiday!

That above advice would work unless you are an extreme extrovert, one that needs the energy and buzz to feel alive! The composer and pianist Franz Lizst frequently travelled when performing, but was known to feed off the energy and excitement, that if he was not part of the buzz, he would just fade away. Stillness was quiet for him, but too quiet. Perhaps everyone is different – and when you are with someone, identifying their natural tendencies would help you avoid upsetting the other person. Try to identify what kind of person they are, and work with their sensibilities.

Land limitations, diet and music

Would you eat an insect to save the world? It may sound like a ridiculous point of comparison, but the fact is that the world population is increasing at a rate that is unsustainable in terms of food production. The world’s population already numbers somewhere between seven and eight billion, and every twenty years or less, an additional billion is added on to it.

The largest countries in the world are China and India, with populations each over a billion; China has an estimated 1.4 billion people while India has about 1.2 billion. (Strangely enough, India often does not feature in news reports about large populations; the media prefers China as its poster boy instead.) At the current rate of growth, by the end of this century we would have added an extra China AND India to the world!

This has repercussions for land use and economic considerations. Already we are struggling to produce food for the current world population. How are we going to produce more food to that effect? Which is why ridiculous as it may sound, some people are proponents of an insect diet. They suggest that insects are plentiful, do not require large space to grow, have quick production rates, and some of them are pests after all and would not be missed – in fact we would be doing the world a favour if we helped eradicate the world of them.

Would you eat a cockroach burger? Or might you fancy grasshopper kebabs? Unfortunately as things stand these do not sound very appetising – but perhaps if gourmet restaurants start a trend by serving them as micro-protein within food, it might help make them more acceptable? How about chilli con cockroach?

Unfortunately, it is the limitations with land space that necessitate a change. If we had unlimited land, we could stave off the need for change (but that’s also assuming that we could find a way of limiting carbon production). But unfortunately we do not, and the methods of the 1980s – bigger and more – have to be curbed and managed.

We can take a leaf out of the page of classical music. The Romantic piano composer Ferruchio Busoni wanted to recreate the organ music of Bach on a piano. Unfortunately, this meant that bigger pianos had to be made to accommodate strings at the upper and lower frequencies. But while he was responsible for bigger pianos – the world’s largest piano currently has 108-keys, nearly 25% increase in size – we can’t simply keep making bigger pianos because of the space they occupy and also because of the cost. Read more about Busoni and large pianos on the Manor House piano teacher website, or visit

As with all things, a resolution between two opposing circumstances.

Changing social practices

Would you expect to go into a supermarket, be charged a debit amount, and then have the value of your purchases added up and the original amount debited refunded to you? Amazingly, this is what some supermarkets in the Far East have been doing. If you for example came to one of these such supermarkets, you would be greeted with a turnstile at the entrance, whereupon you would have to tap a credit card to operate the barriers for entry. And after you had done the shopping for the day or the week, you would pay separately for the items you had purchased. And just before you exited the store, you would be credited with the amount taken from you in the first place. It sounds a bit like a sort of entry tax, except that you are not charged for the entry. The money is only held temporarily until you leave the store.

If it sounds like an over-complication of matters, it is. Why would any supermarket want to charge you for two separate amounts – the entry fee and then the purchases? It would make their books so complicated with entries that were only temporary. And it throws a lot of extra burden to the shopper, in having to ensure that they got their “entry fee” returned in the first place. Why do it?

Supermarkets have resorted to this to reduce the incidences of shoplifting. The idea in charging a small fee of entry is to discourage petty theft by making it uneconomical to enter a shop to shoplift. A thief would be charged an entry fee on demand, and would have to steal quite a significant number of goods to make up for it. And then there is an entry fee to reclaim, and a card which can be traced.

It is such a good idea, on paper, that some fuel service stations in the UK trialled it at petrol stations to stop fuel theft. Drivers are charged a refundable pump fee, then top up their car and pay for the fuel, before claiming their refund – this prevents fuel theft at the pump by drivers driving off the forecourt without paying. The subsequent cost of lost revenues and lost police time spent investigating may mitigate for the cost in implementing such new measures.

When you are buying a property, once you are past a certain stage in the process you cannot pull out – that is the same intention behind these changing processes. They prevent conflict from arising. We already make downpayments as commitments in other areas of life. When you buy on ebay, and pay through paypal, you have paid for an item before receiving it. If you intend to take up piano lessons, usually you have to pay in advance for a term’s lessons. This is a commitment to lessons, and to guarantee the teacher’s time.

A new means of payment at the supermarket may result in changing social practices in the future – who knows? There may be initial resentment to it, but perhaps in the future it might prevent conflict and result in earlier mediation between parties.


Have you heard of this term called manspreading? There is a video doing the rounds of a woman going around pouring bleach – light diluted ones – on men that deliberately spread their legs apart on public transport or take up more than the agreed space of the armrest. If you have ever been a victim of manspreading, you may agree this is a good punishment for those who do it.
And why exactly do people do it? The reasons for this may vary but it is like asking why people put feet on train seats. Because they are unlikely to be prosecuted for that (although one train company does make it an offence), they don’t really care about others, and because they are insecure. You may not necessarily agree with the suggestion that manspreading masks a certain level of insecurity, but if a person were a country, political commentators might remark that aggressive over-expansionism masks a psychological fear of being invaded and is triggered by such feelings of insecurity. People who manspread decide to take up more space than they need to so that if someone else does the same thing, they would have retained the normal space they are entitled to anyway. It is a pre-emptive strike.

Is it fair to pour bleach on someone who has manspreaded though? We must be careful we do not condone such acts, otherwise crazy individuals might take it upon themselves as vigilantes to throw water on women who do their makeup on public transport. We must be careful not to degenerate as a society.

But sometimes we feel the need to retaliate, in a tit-for-tat manner, in order to deal with the perpetrator. But perhaps a better way of investing our energy, instead of making life as difficult for the other person, would be to seek a resolution for all parties to move on. After all, disagreements can last so long a period and drain our energy so much that less might have been required to resolve it. We can take a lesson from classical music – the solo concerto. Both the soloist and orchestra compete, but in the end, success really depends on how they work together!

Airline mediation

Did you hear about the pony on a plane? He was told to stop horsing around during the take off and the landing procedures. Or how about the turkey that gobbled his inflight meal?

Now those puns are unlikely to get you first prize of the best punch line at the Edinburgh Fringe Festival. In fact, people that you know, and who might normally give a sympathetic laugh (or cough) might even look at you with a blank stare. Tell those jokes to younger children, and you might even get protest cries of “But animals don’t go on planes!”

It may seem as an oddity. But animals are actually allowed on planes. Some anyway. And there have been occasions in the past when animals such as ponies and turkeys have been on planes.

Animals were allowed on planes because some passengers feared flying and were allowed to take them on as some sort of comfort companion, as if having a best friend animal would alleviate the fear of ascending and descending in a metal tin can. Airlines, in a bid to look more inclusive, have recently introduced this new element to flying so as to make it possible for those with anxieties to manage them instead of going berserk forty thousand feet above the air.

However, there wasa recent case of a woman who was denied her chosen travelling companion in the form of a squirrel. The whole plane load of passengers had to be disembarked after the woman protested vehemently about her friend being asked to leave. It wasn’t as if the woman had tried to sneak a squirrel on; she had done it the correct and proper way, following the airline procedure. So who knows how they would have tried to mediate between that?

Does a dispute occur because one party’s view is too futuristic for another? In the world of classical music, the composer Igor Stravinsky sparked a furore with his ballet The Rite of Spring. It was too risque for the time and caused a public outrage. You can read more about this from the Crouch End piano lessons website.

The cases once again highlights the case for proper trained mediation between parties in order to achieve a proper resolution. For your housing disputes, seeking TPOS, The Ombudsman Property Service for dispute resolution!

Investing in Devon

According to some estate agents, Devon is fast becoming a good place to invest in.

Actually, that is not news. The Southwest has often been a good place to park your money in property. The region offers picturesque coastlines, a lovely country feel and loads of open space for your money.

Gill Fielding, founder of Fielding Financial, based in Totnes, claims that Exeter and Plymouth make particularly good investment areas. The towns both have Universities which attract high numbers of students, and hence can command high rental demand.

Also located within the vicinity are good hospitals and sporting facilities, which make them attractive to those actively seeking to rent.

The rise in tuition fees has put strain on students looking to enter University and do a degree and tuition fees of up to nine thousand pounds a year are now common. This has meant that universities which offer degrees for less cost, which would normally not have had a look in, are being considered. Traditionally these have been in the coastal regions, away from big cities, so the lower fees along with cheaper rents have started to make them look attractive to others. Ironically, this demand for rental properties will only push the rates higher for successive students.

How would you invest in property? Find an area that is in demand either by professionals or students. Good transport links, especially rail links or a tram network are essential. This means your property can be easily accessible without the use of a car, and within commute of the big cities. Some landlords even recommend checking out the local rail network timetable to see how often the trains stop, as properties along these areas tend to be more attractive. And if you can find an area that is cheaper to live in, invest in it quick before it is gone!

But it is not just about demand and transportation. Look at the entertainment scene and public facilities. Most rental properties are for younger people who have not yet managed to buy, so if the area you are investing in has an active entertainment scene, such as clubs for bands to perform, or comedy clubs, you may garner more rental income. Pubs, cafes and other social settings are good indicators. Which young person would choose to rent in a place with no social life and feel alone? Not many.

Whatever you do, though, if you do invest, you must make it entirely clear to your tenants that they should not sublet the property out. Increasingly, with the rise of sites such as airbnb, tenants are trying to gain income by even renting out their rented properties without permission. This has resulted in a lot of disputes between landlords and tenants which could have been avoided if tenants had been made aware of their responsibilities. And as a landlord, you would save yourself a whole lot of trouble if you had this point emphasised during the signing of a lease.

In any event of a dispute, remember you can refer to the property ombudsman for mediation. Tpos mediates between tenants and landlords and all other issues relating to property.

A quick summary of what mediation entails

Mediation is a voluntary process in which the people involved in a dispute agree to sit down together with a neutral third party – the mediator – and discuss their mutual problem. They then work together, seeking a solution to the problem with which they can all live. Most often there are two people involved in a dispute, but there is no limit to the number that can be involved, or to who can attend a mediation to help resolve the dispute. While the mediator facilitates this process, the solutions that the people in the dispute come up with are entirely their own.

Mediation is voluntary because if someone absolutely does not want to attend a mediation, trying to force them to do so is unlikely to help in reaching resolution. You may have all kinds of misgivings about the party or parties with whom you are in dispute as you go into mediation, but essentially you must want to at least try to solve the problem. Mediation cannot work in any other way.

Generally, as the first step in the mediation process one party will contact the mediator expressing his or her desire to explore the options for mediation. If the dispute has reached a point where the parties are no longer in communication, most mediators are happy to speak to each person individually and confidentially, and to handle all contact in setting up the meeting between them if that facilitates the process. What the mediator cannot do is to force or coerce the other party to attend. All he or she can do is to talk to them and to explain the principles and processes of mediation, taking care to answer all their questions. Once the parties agree in principle to mediation, and before they’ve even sat down with the mediator, they are showing a willingness to resolve the dispute.

Mediation’s emphasis is on moving forward – not on looking back. Your dispute has got to where it is now and, however it got there, focusing on that part of the problem usually does not help anyone come to a resolution. Mediation’s purpose is to focus on the future and to progress on new terms with which everybody can live.

When you go to court, the focus is always on the past: who has been at fault, who has broken a contract, who has done something wrong, who has done what to whom. At the end of the court process a decision is handed down by the judge which attributes blame and prescribes a remedy. The court generally makes no attempt to give direction on how the parties should proceed in the future, and certainly does not want to involve itself in any ongoing supervisory role. This can be particularly difficult if the parties have to remain in any sort of relationship with each other such as in family cases or in cases involving relatives or work colleagues.

Mediation’s focus is on how to move forward and this is achieved by directing attention on how to solve the problem. It can also contain agreed terms for the future conduct of the relationship, if that is what the participants want.

Disputes in any context tend to generate a lot of bad feeling and high levels of stress. Have you ever been in a dispute with anyone? Most of us have. No matter how small the argument, feeling angry, unheard and misunderstood does not feel good, even if you are convinced that you are 100% in the right. Relationships of all kinds can be heavily damaged by dispute. The longer people remain in dispute with each other, the more they look for evidence to support their point of view in the argument and they therefore focus on the dispute. They fixate on this and focus all their energy on it to the extent that finding a workable and amicable solution that helps find a way out could not be further from their thoughts.

When people are in conflict, stress levels can rise sharply, and this is not healthy for anyone on either side of a dispute. Relationships outside the argument can also suffer when someone is very angry for such a very long time. When an amicable, acceptable resolution is reached, stress levels immediately drop and people feel much more positive and much lighter. A weight is lifted from their shoulders and the time and energy they once focused on the argument can now be used for things that are helpful and enjoyable to them.

Mediation is entirely confidential. This is another very important point and must be strictly observed by the mediator and by all parties to the dispute. Anything that is said or done in a mediation cannot be revealed to outside parties either during or after the mediation.

Mediation is also ‘without prejudice’. If your mediation is one of the few that is unsuccessful, and the decision is taken to proceed to court, whatever was said in the mediation may not be relied on in court by either party without the express permission of the party that made the statement. This means that if something new comes to light in an unsuccessful mediation, this information cannot be brought into the legal arena. Neither can the mediator be brought into the legal arena as a witness, save on the orders of a Judge.

The description of the mediation process as without prejudice means that anything said during the mediation cannot then be used as evidence in any legal proceedings which are being considered or already started. This allows parties to talk openly about options for agreement. Parties are able to suggest new and creative possibilities for agreement without jeopardising their chance to go (or to go back) to court if an agreement isn’t reached. A mutually agreeable outcome is often one which could not have been reached in court.

With the exception of family mediations, where some records must be kept, the mediator destroys all notes and information relating to the meeting apart from the agreements to mediate and the record of the attendees at the meeting. This further protects the confidentiality of all who attend as there is then no danger of any information falling into the wrong hands.

The voluntary and non-binding nature of mediation means that parties are not compelled to reach an agreement and options for an agreement can be discussed without binding themselves to a particular outcome. There is no consequence on the parties if they are unable to agree (other than financial loss where the mediation is self-funded). Mediated agreements are only binding if both parties wish them to be.

During a mediation, while the mediator assists and facilitates the process, the parties are responsible for generating options for agreement and the terms of any settlement reached. The mediator does not offer their opinion on the merits of either party’s case or seek to determine or impose any outcome. They do not make suggestions or recommend proposals for agreement (but may pass offers between the parties if requested to do so). Any agreement reached must be mutually acceptable to all parties and will have been created by them.

It is integral to the mediation process that parties are able to make informed choices, about what to propose by way of agreement and whether to reach a settlement. Mediators encourage parties to explore their positions so that any agreement reached can reflect their needs and interests. Mediators also encourage parties to consider the likely alternatives to reaching a mediated agreement to objectively assess any offer on the table. When a dispute involves legal rights and entitlements, parties should seek legal advice before commencing mediation. Parties may have a legal adviser present during the mediation (or available on the telephone), or be given the opportunity at the end of the mediation to consult a legal adviser before reaching a legally binding agreement.

Mediation invites parties to widen the potential options for agreement and explore new possibilities and ideas. Mediated settlements can be reached where direct negotiations have failed by getting the right people in the same room and breaking down barriers to communication. The time spent by a mediator encouraging parties to explore their own needs, as well as those of the other party, enables participants in mediation to make practical proposals. Such offers may have added-value as they may have huge significance to one party but can be provided with minimal inconvenience to the other. It may involve looking at previously unconsidered options and widening the options for agreement.

The Property Ombudsman offers free, impartial and independent service for the resolution of unresolved disputes between consumers and property agents. The scheme has been providing consumers and property agents with an alternative dispute resolution service for 27 years. A member agent signed up with The Property Ombudsman is obliged to adhere to a code of practice which consumers can take confidence from.

Reasons for investing in properties

A lot of mediation cases result from disputes between landlords who want to maximise their bottom dollar and spend as little as possible, and tenants who feel they are being pushed to do the landlord’s job of upkeeping properties because the landlords are not responsive enough. What makes someone want to invest in property in the first place if they are not prepared to invest time and money into maintaining it?

Cash Flow: Whether you buy with all cash or use today’s favorable financing with a low mortgage payment, positive monthly cash flow occurs when the monthly rent is greater than the monthly expense. This gives you a monthly income from your property investment.

Appreciation: Appreciation is the increase in the property’s value, which generally occurs over time and can also be increased by an investor who adds value to the property through repairs and/or enhancements. This is a great way to create equity in the property.

Depreciation: Even with an increase in the property’s value, the government allows owners a tax deduction on their property over its life span. This annual deduction is called depreciation which you can start taking when you have owned the property for at least one year. By taking advantage of depreciation, the cash flow you receive is protected so that you receive some or all of it tax free. If you are an investor with an income from another source such as a regular job, it can also protect all or some of that income from state and/or federal income taxes. Talk to an accountant to completely understand the full benefits of depreciation.

Tax Benefits: In addition to depreciation, an investor can usually claim the interest portion of his monthly mortgage payment as a tax deduction.

Leverage: Leverage is a very powerful reason for investing in property. If an investor uses 100% cash to acquire a house worth $100,000, and the house increases in value by $5,000 in one year, then the investor makes a return of 5% (assuming no other costs in this case). However, if the investor obtains 80% financing, only $20,000 cash would be required at the closing table, and a bank or other lender would loan the remaining $80,000 to acquire the property. Assuming the same $5,000 increase in value, the investor’s cash contribution of $20,000 would yield a 25% return on investment ($5,000 increase in value divided by the $20,000 investment) in the same one year period of time.

Using the above example, if the investor is able to net even a conservative cash flow of $200 per month, this will result in an additional $2,400 per year added to the increased appreciation. The return for the year would now be $7,400 ($5,000 appreciation plus $2,400 cash flow) and the return on investment would now be 37% ($7,400 divided by $20,000). Even if the property value remained stable with no appreciation, there would still be a positive return of the $2,400 in cash flow with a return on investment of 12%.

Considering these benefits in addition to the low interest rates for financing, you can see how easy it is to accumulate wealth and become a successful investor.

Other Reasons Why People Invest in property
Now let’s look at other reasons why people invest in property. First, let me ask you a very simple, yet provocative question: Why would you invest in property? Understanding the answer or answers to this question will help you along your investment career. Following are the most common answers I have heard during the course of my property career:

Freedom: Frankly, this is why most people start investing in property. They get star struck with the idea of riches that would give them the freedom to stop working for someone else. They may have a great job that they absolutely love that pays the bills, but they still want to achieve long-term freedom. They can see that by buying and holding cash flow properties over time (and sacrificing and delaying gratification), in five, ten or twenty years, they can have a pile of monthly cash flow and have gained the freedom they desire.

Control: Some investors I speak with want property in order to gain some degree of control over their financial lives because, let’s face it; we have zero control in financial investments outside of property investing. If you invest in the stock market or money market funds, you have no control over the return you will make. With property, there are things that you can do to control your return on investment as shown above.

Alternatives: Some investors will admit that property is nothing more than a portion of their overall investment portfolio. Perhaps they have divided their portfolio to include mutual funds, stocks, property, etc. Or they may be looking to achieve higher returns from their cash through active management.

Job Escape: A few investors look at property investing as a career, or a chance to own their own company. Others may look at property as a means to eventually replace the job or career they currently hate. Creating Value or Thrill of the Hunt: Many investors love the thrill of the hunt, chasing down a deal or cashing in on their last remodel. They pursue that addictive feeling and are always looking for the next rush or opportunity to turn an ugly duckling into a beautiful swan.

Options: After many years of property investing, I have come to realize that in the end people love investing in property because it has given them so many more options. They have the options to keep working their current job, to buy property as a full time career, to have the time and money to travel, etc. The more they invest, the more option doors are opened.

The Real Reason to Invest in property
People fall hard for the sexy pitch of earning freedom. Frankly, freedom is good but I think what people really want is options. That is why they keep working so hard to find the next deal, to find the next investor, and to keep building their growing portfolio. Some might think freedom and options are the same things. But freedom is more sustained while options are more temporary. But to me, freedom means that a person can stop doing something while options mean a person can do other things. I can tell you firsthand that having options is better than having freedom. I would say you get freedom first and then you build or acquire options.

Why moving house is stressful and how to manage it

A recent study found that over two thirds of adults would put moving house at the top of the stress list. The whole process of shifting from one property to property can cause stress levels to rise, catastrophically in some, and at least to some degree in others. It is not unsurprising of course. Imagine having to pack up all the items in your fridge, placing them carefully so they are not damaged in transit, then transporting them to be transferred in a different fridge elsewhere. The process of moving house is similar to that, but on a greater level. It may even involve transporting the fridge itself! The whole process of bundling your life’s possessions into little boxes and hauling them elsewhere to unpack can be a physically exhausting process.

Some people liken the whole process to military boot camp. You do physical tasks, for what seems like a menial purpose over and over again. Lift box. Put box in removals van. Lift next box. You could at least look at the positive side of things. In the whole process of moving house you could unearth a few lost items that you had forgotten about. Moving house involves excavating behind the settee, behind cupboards and may reunite you with old treasures.

Is it fair to say though, that the physical side of moving house is only the tip of the iceberg? The actual day is only one in the long run of things, a chain that starts with viewings, making offers, mortgage agreements in principle, conveyancing, exchange of deeds. Along the way there are various conversations to be had with estate agents, solicitors, the other party. All that increased workload has to be factored in the working day and fitted in somehow among the demands of work, because normal life can’t stop just because you are moving house … and in the midst of all that there is the constant thought of wondering if you made the right choice. But the most important trigger of stress could be said to be – amidst all that has been mentioned – the threat of a sale falling through. All the work and planning for moving house could be for nothing, and could be wiped out with a single phone call. Why do sales fall through? It could be your finances not adding up. It could be that the seller is in a chain and further up there has been some complication which has fallen back on you. Or it could be something as fickle as the seller trying to extract more money from you, using improving market conditions as an excuse. Or the seller may simply have decided not to move.

Of the above reasons, only one is within your control. When you commit to a purchase, your time and energies are placed in one basket, but this commitment to the buyer is not necessarily reciprocal. It is a bit like buying a lottery ticket with your last pound, and hoping the results will work in your favour. And the prolonged process of trying to live under that kind of umbrella can evoke underlying stress.

Moving house is also not just about moving properties. For some, it is also about a change of lifestyle especially if you are relocating from city to country or vice versa. A change in locations especially across cities may mean changes in relationships, your helpful neighbours in London may find it hard to make it to Bedford. Moving house may also mean moving jobs. The transitions between two different sets of lifestyles, and having to straddle between them for a few months, can similarly be difficult. And if you are moving into a property that needs renovating, there are more obstacles to life in the road ahead.

No wonder moving house causes stress. On one hand, it is the culmination of one process that started with looking for a new home. On the other hand, it is the start of a new stress process of a new lifestyle. And the actual move itself can be stressful.

But there are things you can do to alleviate the stress. You can never eliminate stress completely, but the sense that you have done all you can for the things within your control can give you some stability and peace of mind throughout the process. Get your agreement in principle in order before you make an offer. Make a list of moving companies in your area and services in the area you are moving to. And when you are looking for properties, choose an agent registered with The Property Ombudsman. This ensures that you have some avenue for redress in event of a complaint. You may not need it, but the feeling of being in control may help reduce the stress normally associated with moving.

Some things to consider before investing in commercial property

Commercial property is property that is not designed or used for residential purposes, or for purposes associated with the primary industries such as agriculture and mining. The three main types of commercial property are offices (single office buildings and business parks), retail (individual shops, shopping centres, retail warehouses and supermarkets) and industrial (factories, warehouses and distribution centres). The remaining properties are those used for leisure (pubs, restaurants and hotels), sport, education, the provision of utilities and healthcare (hospitals and nursing homes).

The value of UK commercial property at the end of 2015 was £ 871 billion, about 10% of national net wealth, almost half of the value of government bonds and 40 % of the UK’s stock market. Within that figure of £ 871 billion, retail accounted for £ 360 billion (41%), offices £ 270 billion (31%), industrial £ 168 billion (19%) and other commercial properties £ 73 billion (9%). Commercial property activities employed almost 1 million people and the sector contributed about £ 68 billion (4.1%) to the UK’s Gross Value Added. (The figures quoted are taken from the Property Data Report 2016, produced by eight members of the Property Industry Alliance.) Although the residential property sector is over six times larger (by value) than the commercial property sector, the vast majority of residential properties are owned by private householders, so there is not as much scope for residential property investment as there is for commercial property investment.

About 45% of all commercial property is bought by owner-occupiers, who need land and buildings from which to conduct their business. Some of these occupiers want to buy a freehold or long leasehold interest in the property because they need certainty and complete freedom to deal with the property as the business dictates, but it does means that a lot of capital is tied up in the building. Other occupiers prefer to take a so-called ‘rack rent lease ’, where the occupation cost is paid, usually quarterly, over the period of the lease by way of rent, rather than all at the beginning. In recent years, particularly among the large food retailers, there has been a move away from freehold ownership through ‘sale and leaseback’, where the freehold interest in the property is sold to an investor (thus releasing capital for use in the operating part of the business) and the occupier takes a rack rent lease instead.

The other 55% of all commercial property is bought by investors, who buy property to let out to others so that they can make an income from the rent and a profit from any increase in the capital value of the property. Although the capital value of commercial property suffered a considerable fall in 2007 and 2008, it remains popular with certain types of investor because the average lease offers an income stream of about seven years. So the income return (or ‘yield’) from commercial property is reasonable (13.1% for directly-owned commercial property in 2015, better than UK equities and bonds). Over the 44 years prior to 2015, commercial property produced annualised returns of almost 10.9%, somewhere between gilts and equities (see page 18 of the Property Data Report 2016). Commercial property has tended not to track the performance of gilts and equities particularly closely, so including some commercial property in your investment portfolio is a way of diversifying and spreading risk. Moreover, by good management of tenants and/ or refurbishment of a tired building, a property investor may be able to enhance the value of the asset, even in times of economic downturn.

There are two ways to invest in commercial property, directly or indirectly. Direct property investment involves buying a property in your own name or in the name of a group company, letting it out, taking responsibility for managing it and selling it on when you no longer require it. Although you can employ surveyors and other professionals to assist you, this still uses up a considerable amount of time and effort. It also means that you have to find a considerable amount of cash, or a loan, or a combination of both, to fund the initial purchase. An alternative way is to buy shares or units in a company that invests in a range of commercial and residential property, such as a real estate investment trust (REIT) or an offshore property unit trust (PUT). These indirect property investment vehicles offer opportunities for smaller levels of investment, some taxation advantages, less management responsibility and, arguably, greater flexibility as it may be easier to trade units than to sell a property. However, indirect property investment is beyond the scope of this book.

So who invests in commercial property? According to figures in the Property Data Report 2016, overseas investors held the largest block of directly-owned investment property (28%); UK insurance companies and pension funds held 17%; UK collective investment schemes held 16%; UK REITs and listed property companies held 15%; and UK private property companies held 12%. Traditional estates and charities and private investors held 5% and 3% respectively. Some of the units in the UK collective investment schemes are bought by private individuals, but many are bought by the investors who also buy property directly. For example, in 2015 the UK insurance companies and pension funds invested £ 84 billion (2.8% of their total investments) in directly owned UK property, £ 57 billion (1.9%) in collective investment schemes and £ 37 billion (1.2%) in UK and overseas property company shares.