The five risks of commercial property, and how they are managed

Any investment that pays more than a bank deposit carries risk. Commercial property is no exception, and the honest way to invest is to understand exactly where the risk sits.

Vacancy risk is the most visible. If a tenant leaves, rent stops until a new one is found. Long lease terms, security deposits of several months' rent and penalty clauses for early exit all reduce this risk, which is why the lease summary on every listing matters more than the photographs.

Tenant default is related but different: the tenant stays but stops paying. Creditworthy corporate tenants, national brands and bank branches default far less often than small businesses, and this is reflected in how listings are vetted.

Valuation risk is that the property is worth less at sale than projected. Independent valuation at purchase, conservative appreciation assumptions and a diversified spread across cities and asset types are the main defences.

Liquidity risk is often underestimated. Your share can be listed for resale to other investors, but there is no guarantee of a buyer at the price you want. Invest money you will not need for the full tenure of the listing.

Finally there is manager risk: the possibility that the platform itself fails. The structural protections here are that properties are held in separate legal entities that you own shares in, investor funds sit in bank escrow rather than company accounts, and accounts are audited by an external firm. Read the ownership structure page for the full detail.