Commercial properties have a distinct advantage over other asset classes, such as houses units and shares. Just like homes, they span a wide range of prices types and locations. You need to take your time and conduct proper due diligence before purchasing to avoid the pitfalls.
One thing you can expect from making this shift is that the yields tend to be greater, by far, than what you can expect from residential investments. This creates better cash flow and creates a higher chance of being “positively geared” down the track.
It is not unusual for leases to be in the three to the five-year range, with modest annual increases and the bonus of recouping your statutory and operational outgoings incurred from your lessee as well.
Capital growth rates have always been steady and are usually income-based so any upside in or value-adding that adds more income adds value to that asset. However, asset location, exposure to the business cycle and confidence, trends, class of tenant, security on the lease, fit-out, term of the lease, redevelopment upside, net income, deposit rates and how the economy is tracking helps set the asset value, compared to residential trends that are simply suburb or city base trends.
The entry point can be quite affordable compared to residential, for example, a car space in the CBD for $50,000 or a kiosk in a strata high rise building for $250,000. Whilst commercial properties come with more complexity than residential investments, a prospective buyer needs to be well versed on the ins and outs of commercial leasing, how the retail leases act sets parameters, and local knowledge.
At Noonan Real Estate, we have a team of professionals with thorough knowledge of and proven success in Commercial sales, leasing, and asset management. If you are thinking of buying or selling, we are well-positioned to act as your Buyers Agent or Selling Agent.
