Landlords turning to semi-commercial and HMO properties

Semi-commercial and HMO properties are driving professional landlord investment, according to new data from Shawbrook.

Landlords are increasingly turning towards semi-commercial property when it comes to expanding their portfolios, with applications increasing by 58% in H1 of this year compared to the same period in 2024. 

Shawbrook has also seen a 32% increase in new purchase applications in H1 year-on-year, compared to a 24% increase in the same period between 2023-2024.  

When it comes to the types of property types landlords are investing in, retail space above flats is continuing to prove the most popular option. 69% of landlords have opted for this type of commercial property in H1, up from 60% the year prior. For smaller investors, many semi-commercial assets also come with a future value generation through the use of permitted development rights to add residential units.

As well as semi-commercial property, HMOs are also increasing in popularity. HMOs made up 26% of Shawbrook’s buy-to-let business, a slight increase from 25% in H1 2024.

Daryl Norkett, director of real estate proposition at Shawbrook, commented: “While interest rates are more stable, they still remain high; and landlords continue to face a plethora of economic challenges. Despite this, they have once again proven themselves to be agile and adaptable, and are turning to property types which offer higher yields compared to traditional single lets.

“It is no surprise that semi-commercial properties are in demand, largely thanks to the benefit of having both commercial and residential space, meaning that landlords can enjoy higher yields with more diverse income streams. Often, there may also be future development opportunities. It is particularly encouraging to see more purchase business in the market as it indicated committed property professionals are expanding their businesses. HMOs require more intensive management but continue to offer  good income when well run, and also give landlords the ability to pass through increases in market rents more quickly as tenants more regularly turnover."