The risks of commercial property investment, honestly set out
The main risks are tenant failure, empty periods, illiquidity, falling capital values and, where borrowing is used, a forced sale. Commercial property produces comparatively steady income while a good tenant is in place, but the income can stop, the value can fall, and you may not be able to sell when you want to.
Last reviewed September 2026.
Tenant risk
The income depends entirely on tenants paying. A tenant can fail, go into administration, or use a break clause and leave. When that happens, the income from that unit stops at once.
This is the most consequential risk in the asset class, and it is why the financial standing of the tenant matters more than the length of the lease. A fifteen-year lease to a struggling retailer is worth less than a five-year lease to a strong business.
How we approach this at Helmsley →
Void risk
When a unit is empty the income stops but the costs do not. Business rates become payable by the owner after a short relief period. Insurance continues, and cover for an empty building costs more. The building still has to be heated, secured and maintained. There may be an incentive to pay to attract the next tenant, such as a rent-free period or a contribution to their fit-out.
A void is not just an absence of income. It is a period of negative cash flow, and it can last longer than anyone forecast.
How we approach this at Helmsley →
Illiquidity
Property cannot be sold quickly. A building takes months to market and complete. A share in a syndicate has no established market at all and depends on finding another qualifying buyer.
The uncomfortable part is the timing. The moment you most want to sell, in a downturn or when you need cash, is precisely when buyers are scarcest.
How we approach this at Helmsley →
Capital value risk
Values move with interest rates, investor sentiment, local economic conditions and the strength of the income. They fall as well as rise, and they have fallen sharply within living memory more than once.
A building's value is closely tied to its income. Lose the tenant and the value falls, often by more than the lost rent would suggest, because a buyer prices in the risk and cost of re-letting.
How we approach this at Helmsley →
Leverage risk
Where borrowing is used, three further risks appear.
Interest is paid before investors, so a modest fall in rent can remove the distribution entirely. Loan covenants, usually on loan-to-value and interest cover, can be breached by a fall in value even when the rent is being paid in full, which gives the lender rights over the building. And loans mature, and have to be repaid or refinanced on whatever terms are available at that moment.
This is how most property investors who lose money actually lose it: not because the building was bad, but because a lender forced a sale at the bottom of the market. It is the reason our syndicates have never borrowed.
How we approach this at Helmsley →
Obsolescence and capital expenditure
Buildings age. Specifications that suited occupiers twenty years ago may not suit them now. Plant fails, roofs fail, shopfronts date.
Energy efficiency rules have become a live cost. Commercial lettings in England and Wales must currently meet a minimum EPC rating of E, and in June 2026 the government confirmed that buildings over 1,000 square metres will need to reach EPC B from 2031, where it is cost-effective to do so. A building that cannot be let without significant spending is a liability, not an asset. Listed buildings, of which we own many in York, need particular care here.
How we approach this at Helmsley →
Concentration risk
One building, one tenant, one town is an all-or-nothing position. Spreading capital across several buildings, sectors and locations changes the risk profile a good deal, but it needs either more capital or a structure that provides the spread.
How we approach this at Helmsley →
Manager risk
Wherever someone else manages the asset, you are relying on their competence and their honesty: whether they buy at sensible prices, manage tenants well, and tell you the truth when something goes wrong.
How we approach this at Helmsley →
Regulatory and structural risk
Where the investment is an unregulated collective investment scheme, there is no Financial Services Compensation Scheme protection and no recourse to the Financial Ombudsman Service. Tax treatment and property law can change, and in recent years they have.
How we approach this at Helmsley →
What can be managed and what cannot
Some of these risks can be reduced. Tenant risk, by assessing the covenant properly. Concentration, by spreading capital. Void risk, by owning buildings in places that re-let. Leverage risk, by not borrowing.
Others cannot be removed at all. Illiquidity is inherent. Values will move. Regulation will change.
The right response is not to look for an investment without risk, because there is no such thing, but to understand which risks you are taking and to size the commitment accordingly. Take independent advice.