Unlike buying residential real estate, investing in commercial property is generally viewed as the territory of more seasoned, wealthy investors. However, as long as you’re willing to learn and put in the work, there’s no reason you can’t succeed when you venture into the world of commercial real estate.
After all, if you can, diversifying your asset portfolio is a proven way of minimising your risk exposure whilst working toward achieving your long-term financial goals.
If you’re new to investing in commercial property and unsure if you’re headed in the right direction, we’re here to provide useful information that can help as you go along.
Below are the 5 key factors you need to consider when it comes to commercial property investment.
1. Tenant and lease
The ideal scenario in commercial property investment is purchasing a property which already has a commercially successful long-term tenant because it’s more difficult to find commercial tenants. The commercial property sector is also more vulnerable to changes in the economy, such as crises like the global pandemic and cycles of boom and bust.
2. Economic situation
The demand for goods and services is far more elastic than that for housing, so commercial tenants are more susceptible to economic shocks. The market for commercial real estate can be influenced by changes that are widespread and economic in nature — from consumer spending patterns to innovation or disruptions in technology. So, make sure you stay informed on the latest economic trends to make finding a good tenant easier.
Location truly is king. However, aside from finding a commercial property in a good location, you also need to check if the desired amenities that match your property are in place. For example, if you’re investing in a warehouse or industrial property, you also need to check if it has excellent road access as well as its proximity to airports, ports and other transportation hubs.
4. Future developments and infrastructure
Consider the future while evaluating your prospective property because what may appear to be a profitable space today may turn into a losing endeavour tomorrow. For instance, if there are numerous infrastructure projects underway on the other side of the city, you might want to think twice before purchasing a property elsewhere. This is because it may be difficult to persuade businesses to relocate to your property location when they want something that’s closer to the new infrastructure.
5. Quality of the property
The quality of the building is another key factor in commercial property investing. Make sure the structure is sound and that its layout is appropriate for the types of businesses you want to attract.
Don’t pay more than a property is actually worth. To ensure you’re paying a fair price, conduct your own research and compare its asking price with similar properties on the market. Also, don’t be afraid to negotiate for a significantly lower price if the structure needs repair or renovation.
Remember, investing in commercial property comes with a lot of risks. However, the potential for high, long-term returns is also there.
Consider the factors discussed here in your quest to find a viable commercial property.
If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.
This information does not take into account the objectives, financial situation or needs of any person. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation or needs.