With returns from many asset classes earning next to zero, investing in commercial real estate can be a sensible option for yield-hungry investors.
Also, owning a quality, well-located commercial or industrial property is a fantastic way to add some diversification to an investment portfolio, along with decent long-term returns and yields significantly better than bank savings accounts or bonds. This combination of benefits has proved attractive to self managed super funds who continue to be significant players in commercial and industrial property markets.
If you’re new to commercial real estate, there are several differences between owning a commercial property compared with a residential asset. For example, commercial and industrial investors need to have a deeper understanding of the broader economy than residential investors because the demand for commercial properties is more sensitive to economic shocks. Commercial investors generally need to conduct more research and be sure the numbers stack up financially. Buying a commercial property, therefore, is usually a decision based on your wallet, whereas many residential property decisions are ‘decisions of the heart.”
Commercial property leases typically offer more security to an investor than residential property agreements, which are typically 6-12 months. Commercial leases can be 3-5 years or more.
For their part, commercial ‘lessees’ sign longer leases as they will usually prefer to stay in their premises for longer. A longer lease gives lessees time to establish themselves in a specific location. Also, unlike a residential tenancy agreement, commercial lessees typically pay outgoings such as council rates, water, insurance or body corporate fees and so on. For the commercial property investor, this means fewer ongoing costs.
If you’re investigating the possibility of investing in a commercial property, Raine & Horne Commercial has just released its Spring 2019 edition of Commercial Insights, providing an in-depth look at commercial markets across Australia. Alternatively, call one of our local commercial real estate specialists in your region to find about the investment opportunities available to you.
We are a full-service commercial real estate network with a broad suite of commercial, industrial and retail property services including sales, leasing, consulting, business broking, business recovery and insolvency, facilities and asset management services.
If you are considering investing in a commercial property, contact your nearest Raine & Horne Commercial agent for more information.