More landlords are investing in semi-commercial property, suggesting many are turning away from residential in search of better returns.
Applications with Shawbrook Bank increased by 58% in the first half of 2025 year-on-year, including a 32% rise in new purchase applications.
Retail space above flats is a popular option, which is what 69% of landlords invest in.
Many semi-commercial assets also come with a future value generation through the use of permitted development rights to add residential units.
Daryl Norkett, 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.
“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.”
As well as semi-commercial property, HMOs are also increasing in popularity, as they made up 26% of Shawbrook’s buy-to-let business, a slight increase from 25% in H1 2024.