Commercial Watch Episode 01 | Buy-to-Let Market Shifts & Opportunities. Welcome to the launch of our Commercial Watch series with Episode 1, where we spotlight key developments shaping the buy-to-let mortgage market. Recent shifts in tax relief, stamp duty, rental stress testing, and PRA rules for portfolio landlords have significantly reshaped the landscape.
As a result, many landlords are actively seeking alternative strategies to offset rising costs and tighter regulations. One clear trend is the increasing move toward commercial and semi-commercial (mixed-use) property investments, which offer potential solutions for experienced and portfolio landlords alike.
This growing interest in diversifying into commercial and specialist buy-to-let sectors reflects a broader response to market challenges. Not only can this strategy help ease regulatory pressure, but it may also lead to stronger long-term capital growth, especially as demand drives prices upward and reduces available stock in these niche sectors.
To explore how advisers can support clients with complex cases, visit our Specialist Mortgages for Clients With Complex Cases.
Rising Demand for Semi-Commercial Buy-to-Let Properties
The UK property market is seeing a notable rise in interest in semi-commercial buy-to-let investments, typically properties featuring a retail unit (such as a shop) with residential accommodation above. These hybrid assets combine the benefits of both residential and commercial buy-to-let, making them increasingly attractive to savvy landlords and investors.
An emerging trend shows shop owners actively seeking planning permission to convert upper floors into flats or, in some cases, fully redeveloping retail premises into residential housing. This shift aligns with traditional BTL landlords looking to diversify their portfolios with semi-commercial assets that offer both yield stability and growth potential.
Semi-commercial opportunities extend beyond shops. Properties above pubs, restaurants, hotels, garages, and even supermarkets are being converted into flats to address the UK’s housing shortage. Supermarket chains, in particular, are exploring airspace development by adding residential units above stores, an approach supported by many local councils due to its use of brownfield sites and contribution to housing targets.
For experienced buy-to-let borrowers, semi-commercial property presents a logical progression: retaining familiarity with residential elements while entering the commercial space with lower risk. Lenders are also increasingly favouring applicants who have demonstrated success in managing multi-unit or portfolio BTL properties, making this a strategic move for growth-focused landlords.
“Even supermarkets are exploring ways to build residential flats above their stores.”
Comparing High-Street and Specialist Buy-to-Let Lenders
When exploring commercial buy-to-let finance, advisers must weigh the pros and cons of high-street lenders versus specialist buy-to-let providers.
High-Street Commercial Mortgage Options
High-street lenders often offer competitive commercial mortgage rates, typically in the 3–4% range. However, these seemingly attractive deals come with limitations. Loan-to-value (LTV) ratios are usually capped at 60–65%, which can restrict borrowing power for many clients. In select cases, lenders may extend to 80% LTV for established trading businesses, but only under strict criteria.
Repayment terms are commonly structured around tenancy agreements, providing predictability for both borrower and lender. Additionally, many high-street banks require in-person meetings to fully assess the business case, ensuring a thorough review of the applicant’s financials and long-term viability.
While stable and cost-effective, these products may not suit clients with non-standard income, complex portfolios, or evolving commercial plans.