Ten years on from the crash which saw the value of commercial property and land in Northern Ireland plummet, prospects for the industry are beginning to improve.
And for those seeking to invest, the range of finance options open to them is also changing.
Many are turning away from traditional routes such as banks – which typically seek around a third of the overall investment required up front.
Of those, an increasing number are dipping into their own pension funds to find the required capital.
Directly investing in commercial property or land is one of the most common reasons business owners establish a Small Self-Administered Scheme (SSAS), an arrangement which allows them to use accrued pension funds to make investments.
A SSAS pension fund can be used to build up a wide commercial property portfolio and it is also common to invest in the property occupied by the sponsoring company.
Rental income is received tax-free and is treated as a tax-deductible expense for the payer while there is no capital gains tax on disposal.
And analysts suggest that rental income is set to rise, meaning the present could offer a prudent time to invest.
Successive reports into the state of the commercial property market in Northern Ireland point towards a restricted supply across the sectors – a trend which has also resulted in increased rent rates.
That’s because demand for commercial space remains buoyant, according to the most recent Commercial Market Survey by the Royal Institution of Chartered Surveyors (Rics) and Ulster Bank.
It said overall enquiries rose over the first three months of 2017 with a net balance of 27 per cent of respondents reporting occupier demand being up across all sectors.
Meanwhile, the availability of commercial space has declined and as a result three month expectations for rents have risen.
For those owning commercial property in a pension fund, there are further benefits due to the generous tax advantages attached.
For example, the money used to fund the purchase can be tax relieved, based on relief received on historic and/or new pension contributions used to finance the transaction.
Once rental income is paid into the pension fund, it will also benefit from tax-free growth while the business leasing the property will receive further tax relief on any rental payments paid into the SSAS.
And because assets which are part of a SSAS are held in a trust and are completely distinct and separate from the company or member’s personal assets, the arrangement provides worthwhile protection from any potential creditors.
Seeking professional advice will assist prospective investors in deciding which funding path is appropriate for their needs and help them profit from the improving commercial rental market.
Allison Chambers is Director of SSAS Solutions, Northern Ireland’s only dedicated SSAS consultancy which administers schemes on behalf of more than 300 of the region’s best known companies and high-net worth individuals.
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