The different types of commercial properties

There are different types of commercial buildings, and they are divided into classes under the Town and Country Planning Order of 1987. The class given to a commercial building defines what the building can be used for. The classes were revised in 2020.

If your goal is to renovate a building, or change its intended use, you may have to get planning permission.

If you’re looking to invest in commercial properties and want help navigating this often tricky landscape, read our guide to buying commercial property here.

Choose the right commercial property for your investment goals

Before buying a commercial property for a specific business type, it is important to check whether the building’s use class is appropriate.

If it isn’t, but you want to buy it anyway and change its intended use, you are likely to have to apply for planning permission from your local planning authority (LPA).

If you are renting the building you operate your business from, you might want to make significant changes to it at some point. However, it is common for landlords to include clauses in the rental contract which can stop you.

If a contract intending to stop you from making changes to a property was in place, and you made changes anyway, the owner may be granted rights that compensate them. This is why it is imperative to choose a commercial building with the right use class for your purposes.

Stamp Duty Land Tax on commercial buildings

Commercial property above £150,000 in value is subject to Stamp Duty Land Tax (SDLT), or simply, ‘Stamp Duty’- here is a comprehensive guide on paying stamp duty on commercial properties. You can use our commercial stamp duty, LBTT and LTT calculator to find out what you might pay.

For more a general overview of borrowing for commercial property, read our page on commercial mortgages.

What are the different types of commercial property?

There are many different codes to differentiate the use cases for commercial property types, as defined by law. These codes were revised in England in 2020 changing the old classifications from 1987 (Scotland, Wales and Northern Ireland have not implemented the 2020 changes). Under the new classifications, the previous classes A1, A2, A3, B1, D1, and D2 are now banded as Class E. 

Below we have gone into more detail on each property type, including the maximum loan to value you can achieve when taking out a commercial mortgage.

However, bear in mind, that if you cannot meet these thresholds, you may be able to raise a deposit from other property you own, ask our advisors about this for more information.

With all types of commercial mortgages, if the borrower can demonstrate experience in the sector, you will be more likely to achieve a lower mortgage interest rate than without experience.

Offices

There are many different types of offices to consider as an investor. Location is a key factor in your choice.

This is because employees and companies value convenience and ease of commute when it comes to a workplace. Facilities and utilities are also important (e.g. meeting rooms, reception space, air conditioning and reliable internet connectivity).

Office spaces are classified as Class E, defined as spaces for financial services such as banks, professional services that are not medical, estate and employment agencies, and an office used to carry out any operational or admin functions.

Typically a lender will be able to offer up to 75% LTV, meaning you will need a deposit of at least 25% of the property value.

Retail space

A retail property classification changes depending on the purpose of building:

Class F.2: is defined as shops of no more than 280 square-metres in size that sell essential goods, and that are at least 1 kilometre from another similar shop.

Class E: is defined as retail shops, cafes and restaurants.

When investing in a retail space, it’s always important to ask yourself if the building’s location is likely to pick up public footfall.

In terms borrowing, restaurants can typically achieve up to 65% loan to value, whereas takeaways and shops tend to be up to 75% loan to value.

Industrial properties

There are two over-arching types of industrial property you might consider as an investor:

B2: defined as a building used for furthering an industrial process other than one falling within Class E or B3-B7.

B8: defined as a building use for storage and distribution; for example, wholesale warehouses, distribution centres, repositories.

Classes B3-B7 have more specialist and niche definitions.

For industrial commercial properties, loans tend to be up to 75% loan to value.

Leisure properties

Leisure properties cover a wide range of building types and fall into several different use classes, depending on how the property is used. These include venues for hospitality, fitness, entertainment, education, and community activity. Below is a summary of the main classifications relevant to leisure investments:

Class C1: Covers hotels, guest houses, boarding houses, and similar types of short-term accommodation (but not hostels). These are commonly mortgaged commercial properties and are often valued based on trading performance and occupancy levels.

Class E: This is a broad class that includes many commercial leisure uses, such as:

• Gyms and indoor recreational facilities (not involving motor vehicles or firearms)
• Cafés and restaurants
• Health and fitness centres
• Day nurseries and day centres
• Clinics and non-residential medical uses

This class replaced parts of the former A1, A2, A3, B1 and D1/D2 use classes in 2020.

Class F.1: Includes buildings used for education and cultural activity, such as:

• Schools, colleges, and training centres
• Public libraries and museums
• Exhibition halls
• Places of worship
• Law courts

These are less common as commercial investments unless privately operated or leased to independent providers.

Class F.2:Covers buildings used for local community purposes, such as:

• Small essential shops (under 280 square metres and at least 1km from another similar shop)
• Community halls or meeting places
• Outdoor sports facilities (excluding motorised or firearm-based activities)
• Swimming pools and skating rinks

Because of the diversity within the leisure sector, success can hinge on very specific factors. Location is always important, but you should also consider renovation or conversion costs, local demand, and whether planning consent is needed to alter the use of the building.

If you’re buying a property that needs work before it can be used for your intended purpose, a commercial bridging loan can help cover refurbishment costs before refinancing with a longer-term commercial mortgage. You can read more in our guide to commercial bridging loans.

Loan to value estimates

• Hotels and guesthouses: typically up to 75% LTV
• Gyms: typically up to 70% LTV
• Pubs and nightclubs (Sui Generis): often limited to 60–70% LTV, depending on experience and location

These figures are general guidelines — the actual LTV available will depend on your experience, the strength of your business plan or tenant, and the property's income potential.

Healthcare properties

These are the classifications for healthcare properties:

Class E: Clinics, health centres, day nurseries, or day centres.
Class C2: describes residential institutions like care homes, hospitals, nursing homes, boarding schools, residential colleges and training centres.

Some healthcare properties can attract high loan to value ratios. GP surgeries and pharmacies may be able to achieve up to 100% LTV, where there is strong lease security, such as an NHS contract or long-term tenancy in place. Dentists can go up to as high as 90% loan to value, and physiotherapy centres as high as 80% loan to value.

Sui Generis properties

If a property is classified as ‘Sui Generis’, it is a sign that it stands in ‘a class of its own’, which is the translation from Latin.

These business’ include but are not limited to: theatres, nightclubs, scrapyards, garages, petrol stations, hot food takeaways, betting shops, laundrettes, taxi offices, public houses (which used to be A4), and hostels (not C1 or C3).

We can help you navigate the commercial mortgage world

Once you are clear on the type of property you want to invest in, we can help you secure borrowing to fund your purchase.

Our commercial mortgage advisors can help you find the best rates from amongst our wide range of lenders, as well as helping you through the whole application process. Request a call-back from our advisors here.