Shawbrook has reported a marked rise in interest in semi-commercial property from professional landlords, with applications up 58% in the first half of the year compared with the same period in 2024.

The lender also recorded a 32% year on year increase in new purchase applications during the first half, compared with a 24% jump between 2023 and 2024.

The trend reflects a broader search for stronger yields at a time when interest rates remain high and operating costs continue to squeeze traditional buy-to-let returns.

SEMI-COMMERCIAL DEMAND GATHERS PACE

Among semi-commercial assets, retail premises with flats above remain the most sought after. Shawbrook said 69% of landlords opted for this type of property during the first half of the year, up from 60% in the equivalent period last year.

For smaller investors, these assets can also offer further upside through permitted development rights, allowing additional residential units to be created over time.

The appeal stems from the ability to blend commercial and residential income, often producing higher overall yields and offering some protection through diversified revenue streams.

The rise in purchase activity also suggests that committed landlords are continuing to grow their portfolios despite a more challenging economic backdrop.

HMOS MAINTAIN THEIR MOMENTUM

HMOs also remain a key focus for many professional landlords. They accounted for 26% of Shawbrook’s buy-to-let lending in the first half of this year, a modest increase from 25% in the same period of 2024.

Although management demands are higher, HMOs can produce stronger income and allow rents to adjust more frequently due to higher tenant turnover.

Daryl Norkett (pictured), director of real estate proposition at Shawbrook, said: “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.”

He added: “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.

“Those interested in exploring the semi-commercial and HMO markets or diversifying their portfolios should speak to a broker to better understand their options.”