Due Diligence Checklist for Commercial Property Investment in the UK

Key takeaways:

• Explore the in-depth due diligence commercial property investment in the UK.
• Associate with professionals who can handle the hard work on your behalf and ensure you sit back and relax. 

The UK commercial real estate market is expected to reach $149.67 billion in 2024.

So, are you going ahead with a commercial property investment in the UK?

But before you proceed, you must be aware of all the important factors that can impact your commercial property investment.

Don’t worry. 

We have created a detailed due diligence checklist for commercial property investments to minimise investment risk and increase returns.

Let’s get started. 

Due Diligence Checklist for Your Next Commercial Property Investment

Before purchasing a commercial rental property, you must go through due diligence. 

You must have expertise or association with experts in different departments to ace the process. Here’s the checklist:

Explore the market demand

You have to go through the market demand and check whether the commercial property space is in demand in the market or not.

You can also check the building’s vacancy ratio over the past few years, which can give you a decent idea about the performance of your potential commercial property. 

Value your property

Either handle it yourself or hire a professional valuer who can help you study the value of other similar properties in your area. 

You can also collect detailed information on the rents demanded at other similar properties to analyse the ROI you can get from your investment. 

Also, answer a few questions, such as:

• Are there redevelopment proposals that may benefit or burden the property?
• Is the property easily accessible for the intended tenant?
• What type of tenants does the area attract? 

These answers will clarify the commercial property you want to invest in.

Check the condition of the property

You must carefully check the state of the property. Does it require any repair? Are there any significant defects that you have noticed?

If there are existing tenants in the commercial property, are they taking care of the property and adhering to the existing lease agreement?

Also, check the required certificates for the commercial property to ensure it’s legally compliant with the laws. 

A few surveys are important

You can associate with professionals who can help you conduct a few property surveys.

Here are the following surveys you should perform:

• Environmental/ground survey
• Measurement survey
• Electrical survey
• Mechanical survey
• Site survey
• Building survey

These surveys might not be compulsory in the case of residential property investment but as a commercial rental lease is for a long-term period, you must be thorough with the process. 

Future planning

You have to plan what are your future goals with the property. Do you have to change the use of the property? Are there any environmental complications related to the use of the property that can impact your future goals?

These answers can help you streamline your future planning and reduce the risk. 

Check the insurance policies

You should avoid proceeding further with your commercial property purchase if you are not sure about the existing insurance policy and how to get it transferred.

Check all the premiums paid and the insurance claims relevant to the property. Also, check who is responsible for the policies and whether the property is adequately insured.

Calculate the maintenance costs

Once you purchase a commercial property, you have to handle its maintenance cost. But if you know the repair and maintenance cost beforehand, you can easily calculate your expenses, rental rate, and profits. 

Also, check the available parking facilities and their maintenance costs. 

Leases

Last but not least, you must check the leases, which can directly affect the value of ongoing property management. 

Check the principal terms of the leases:

• Security of tenure/contracted out
• Insurance or charging restrictions
• Termination dates
• Break clauses
• Rents/rent reviews
• Any limitations on service charge recovery.

These are the top-of-the-chart due diligence steps. Apart from these, there are multiple others which you should perform. 

However, managing all aspects can become overwhelming. That’s why you can trust professionals from Pluxa Property.

For insights into maximizing your returns, check our Property Investment Strategies For Maximum ROI

Pluxa Property to Your Rescue

We, at Pluxa Property, offer end-to-end property investment solutions to help you manage your commercial property investment.

From handling your due diligence to finalising your purchase, our team can handle it all so you don’t have to go through the hassles. 

We have helped experienced and new investors make a mark in the commercial property industry in the UK. 

So, what’s making you wait?

Contact our team and discuss your budget and requirements to get a tailored plan and achieve your desired ROI.

FAQs

What to look for when investing in commercial real estate?

Multiple due diligence factors are important to check before you invest in a commercial real estate property. Here are the important factors:

• Explore the market demand.
• Check the value of the property.
• Analyse the condition of the property.
• Go through a few surveys.
• Future planning is important.
• Check the insurance policies.
• Calculate the maintenance costs.
• Check the existing leases.

What’s the list of documents required for commercial property?

Here are the important documents required for commercial property purchase in the UK:

• Title Deeds
• Lease Agreement
• Energy Performance Certificate (EPC)
• Property Information Form (TA6)
• Fixtures and Fittings Form (TA10)
• Asbestos Survey Report
• Fire Risk Assessment
• Planning Permissions and Building Regulations Approval
• Commercial Property Standard Enquiries (CPSE)
• Insurance Documents
• Service Charge Accounts
• Health and Safety File
• Gas Safety Certificate
• Electrical Safety Certificate
• Stamp Duty Land Tax (SDLT) Return