Published by JSF Commercial Finance
The UK property market has seen a significant shift over the past 18 months, with investors and landlords increasingly turning their attention to semi-commercial properties—a class of real estate that blends residential and commercial use under one title. This shift is not a coincidence. According to recent figures from Intermediary Mortgage News, applications for semi-commercial mortgages rose from 13% in 2023 to 24% in 2024, demonstrating growing appetite among investors for mixed-use opportunities.
At JSF Commercial Finance, we’ve seen this trend echoed by our own clients—especially those looking for resilient investments that offer flexibility, risk mitigation, and dual-income potential. But what exactly makes semi-commercial property so appealing? And what should investors consider before entering this growing space?
What Is a Semi-Commercial Property?
A semi-commercial property, often referred to as a mixed-use property, includes both residential and commercial elements. Common examples include:
- A shop with a flat above
- Office space with a residential unit attached
- Retail or hospitality premises with living quarters
- Buildings converted into ground-floor business use with upper-floor rental flats
Crucially, these assets are typically held under one freehold title, making them different from purely commercial or fully residential investments.
Why the Surge in Demand?
Several market and economic factors are fuelling the rise in semi-commercial property investment:
1. Diversified Income Streams
The ability to collect both commercial rent and residential rent from a single property offers a more stable income profile. If the residential unit is vacant, the commercial tenant may still generate income—and vice versa. This layered approach to rental yields has become especially attractive in times of uncertainty.
2. Greater Resilience During Market Fluctuations
Semi-commercial properties tend to be more resilient to downturns than their pure commercial counterparts. In the post-pandemic economy, many high-street businesses have struggled, but having a residential element offers a safety net that investors find reassuring.
3. Potentially Lower Stamp Duty
In some cases, semi-commercial properties are subject to lower Stamp Duty Land Tax (SDLT) than purely residential investments, especially above the £250,000 threshold. This can result in notable upfront savings for investors.
4. Flexible Usage
Many semi-commercial properties offer potential for reconfiguration or redevelopment, allowing owners to repurpose units based on changing market demands. Investors are drawn to this versatility, particularly when planning long-term strategies.
5. Favourable Financing Options
Specialist lenders are increasingly recognising the strength of mixed-use properties, offering competitive rates and flexible criteria. While high-street banks may still shy away from complexity, commercial finance brokers like JSF can access a wider panel of lenders prepared to support these deals.
What Types of Investors Are Looking at Semi-Commercial?
The profile of a typical semi-commercial investor is evolving. Historically, these properties appealed to experienced landlords and business owners, but today, we’re also seeing interest from:
- First-time investors seeking dual-income opportunities
- Portfolio landlords diversifying their holdings
- Entrepreneurs looking to own their business premises while renting out residential space
- Developers interested in adding value through planning and refurbishment
Considerations Before Investing
While the benefits are clear, it’s important for buyers to approach semi-commercial investments with a full understanding of the nuances. Here are key factors to evaluate:
1. Lender Criteria
Semi-commercial properties can fall into a grey area between residential and commercial lending, so loan-to-value (LTV) ratios, interest rates, and terms can vary widely. Some lenders may offer up to 75% LTV, while others will limit borrowing based on the nature of the commercial tenant.
Tip: Work with a specialist broker like JSF Commercial Finance to identify the most suitable lender for your scenario.
2. Tenant Risk and Lease Structure
The success of the commercial part often hinges on the strength of the tenant and the terms of their lease. Longer, secure leases with established businesses may lead to better financing terms and more predictable returns.
3. Valuation Challenges
Mixed-use properties may be more complex to value, especially if the residential and commercial elements vary in condition or rental strength. A clear understanding of the rental market and potential yield is essential before proceeding.
4. Planning and Legal Compliance
Ensure that the property complies with local planning laws, particularly if you’re considering conversion, extension, or change of use. The layout and usage must align with planning permission and building regulations.
5. Management Complexity
Managing a semi-commercial property involves overseeing both residential and commercial tenancies, each with their own legal frameworks. It’s important to be prepared for more active asset management or hire a specialist agent.
Real-World Example
At JSF Commercial Finance, we recently assisted a client in securing funding for a semi-commercial property in Bristol—a corner retail unit with two flats above. The client, a first-time investor, purchased the asset for £450,000 with a 70% LTV loan from a specialist lender.
The commercial lease generated £15,000 per year, while the flats brought in £24,000 annually. Combined, the property offered a net yield of over 8%, with stable cash flow and strong tenant demand in the area.
This is just one of many examples demonstrating how semi-commercial investments can deliver healthy returns, even for newer entrants to the market.
How JSF Commercial Finance Can Help
As a UK-wide commercial finance broker, regulated by the Financial Conduct Authority, JSF Commercial Finance offers clients access to a broad panel of lenders and decades of market insight. Whether you’re purchasing your first mixed-use property or expanding your portfolio, we provide:
- Tailored advice based on your goals
- Whole-of-market access to specialist lenders
- Fully packaged applications for faster decisions
- Support with valuation, legals, and deal structuring
Conclusion
The shift toward semi-commercial property investment reflects broader changes in how investors perceive risk, income security, and asset diversification. With increased demand, competitive financing options, and evolving market dynamics, 2025 is shaping up to be a pivotal year for mixed-use investments.
As always, thorough due diligence and professional guidance are key. If you’re considering investing in a semi-commercial property, get in touch with the team at JSF Commercial Finance. We’ll help you navigate the complexities and secure the most suitable funding for your next opportunity.
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