One of the more interesting conversations we’re having with brokers at the moment is about the growing interest in properties with a commercial element.

More professional landlords are beginning to explore where semi-commercial property fits within their investment strategy, becoming more deliberate about how they build their portfolios and the role each acquisition plays within them.

For most investors, this isn’t about replacing traditional residential buy-to-let. It’s about broadening a portfolio with assets that serve a different purpose and complement existing holdings.

Recent commentary from the NAEA Propertymark Commercial Advisory Panel reflects what we’re seeing ourselves, pointing to a rise in questions from landlords interested in diversifying beyond residential and gaining a better understanding of the different commercial, tax and regulatory considerations involved.

Chances are brokers will be seeing a similar increase in enquiries from investors looking to branch out, so what’s important to consider when placing these cases?

Why are clients considering semi-commercial?

The first stage is getting to grips with why the individual investor is looking at semi-commercial. Understanding their particular motivations is key to finding the right funding partner, since there can be very different factors at play.

Are they looking to diversify for its own sake, to move beyond a portfolio dominated by traditional residential properties? Are they attracted by the different income characteristics semi-commercial property can offer and looking to improve the overall performance of their portfolio? Or perhaps they are looking to reposition their portfolio, to reshape it for the future, with semi-commercial properties forming part of that strategy?

The best brokers recognise that advice is about more than just finding products; it’s about marrying the strategy and intentions of the investor with a lender that can support them for the long term.

Considering both tenants

One of the attractions of semi-commercial property is the opportunity to generate income from both residential and commercial elements. That can provide greater resilience, but it also presents new considerations; finding a commercial tenant is rather different from finding a residential one, after all.

For brokers, it’s key to understand this element of the case. What type of business is the landlord targeting? Is there a tenant already in place, and how secure are they? And if not, how does the investor plan to attract them?

Semi-commercial can deliver greater stability than traditional residential rental properties, alongside the potential for stronger returns, but that’s only achievable when the investor gets the fundamentals right. Brokers are key to steering them in the right direction.

How complex is the case?

There are generally complex elements to semi-commercial cases, though the degrees of complexity can vary significantly. It’s not just the different lease structures or establishing an accurate valuation. If the investor is planning refurbishment work or a change of use, then these are further considerations that need to be understood from the outset.

Looking at each of those elements in isolation rarely gives the full picture. Understanding how they fit together is often what determines whether a case progresses smoothly, which is why experienced underwriting remains so important in semi-commercial lending.

Just as all cases are different, so too are lenders in the semi-commercial space. While some lenders prefer to keep complexity to a minimum, others have the underwriting expertise and flexibility to assess more involved scenarios. If the case isn’t straightforward, that will have a significant impact on the choice of lender.

Making the sums add up

The semi-commercial conversation is evolving, and lender propositions need to evolve alongside it. Across the industry, we need to ensure we are delivering for investors looking to add semi-commercial property to their portfolios.

With some transactions, an off-the-shelf option will be sufficient. But for others, that flexibility will be crucial. Brokers need to determine not only which lenders can support more complex semi-commercial cases, but which are actively listening to the market and continuing to evolve their propositions as investor requirements change.

Investor approaches are changing

The way people invest in property continues to evolve. Professional landlords are taking a more considered approach to building their portfolios, thinking not just about acquiring more property but about how each investment contributes to long-term resilience and performance.

Semi-commercial won’t be the right fit for every investor. But as landlords become more deliberate about how they build their portfolios, the conversation is becoming less about whether semi-commercial has a place and more about when it makes strategic sense. Brokers who understand those wider investment objectives, alongside the lenders best placed to support them, will be well placed to help clients make better long-term investment decisions.

Alex Upton, is managing director, specialist mortgages & bridging finance, Hampshire Trust Bank