Good times are really rolling with commercial property
As Australia’s residential property market starts to hit the skids in some suburbs, investors looking for great yield as well as capital growth are busy eyeing off their next commercial purchases.
Of course, the residential market is continuing to boom in many areas but with Federal and State Governments putting their efforts into infrastructure, commercial property is set to benefit in a big way. On top of this, you can watch this space grow if the proposed reductions to company tax get the Federal green light.
The hard sellers of residential property will tell you commercial property is ‘too risky’ – usually because they won’t make any profit from commercial investors or, worse, they simply don’t understand the commercial landscape.
Nobody can deny the facts though, and the truth is that commercial property can deliver significant returns when chosen well, managed well and matched to each investors’ strategy. Hopefully, this sounds familiar – because it’s the same overarching approach required for successful residential purchases.
Commercial property investors are spoilt for choice as the property range is extensive on a number of levels including type, budget, location, uses and future potential.
Types – When thinking commercial, most people think of huge, expensive purchases however the commercial category includes property as small as an ATM or vending machine and travels on from there. Categories include:
- Signage – includes small fence signage through to major interactive billboards
- Parking / car space – consider purchasing just one space or a multi level building
- Retail – from small mobile vans, to small shop fronts and up to major restaurants, stores and shopping centres
- Offices – includes areas small enough to house one desk through to multi storey buildings
- Industrial / warehouses – some no larger than half a regular garage space
- Showrooms / bulky goods – can be as small as 50 sqm although properties in this category would typically be very large
- Land / developments – includes inner city properties where backyards are split off through to acres of greenfield development blocks
- Hotel / leisure – from small gym spaces through to major hotels
- Medical / consulting – includes small practices for individual consultants as well as multi-level buildings housing 100+ specialists
- Commercial farming – typically large areas although even this category contains a range of sizes.
Budget – At the smaller end an ATM can be purchased for $2,000 while signage or storage spaces can sometimes be converted from residential properties – as long as this is within council regulations.
Locations – Traditional locations for commercial property have changed and now even your local sports field might have a coffee ‘kart’ roll up as and where the demand evolves. With the continued
Uses – Commercial property can often be morphed depending on the needs of the changing community. Council requirements will dictate boundaries of usage, such as retail or industrial, but within this there is scope to adjust commercial spaces for different tenants or to maximise returns.
Future potential – As our population expands, a once popular service station can evolve into a mixed use retail and residential high rise. Often, commercial properties will have a substantial land base and over time in areas with a growing population the local council and / or State Government will re-zone areas to support a higher density footprint.
Commercial property offers significant benefits to business owners, particularly when a business can use the commercial space as well as renting out components of the space for other uses or businesses – for example using a warehouse for office space and renting out signage on the roof. Better benefits come when adding commercial property to self managed super funds – consult with super specialists for details before making any purchases.
If you’re keen to consider commercial property, a sensible step to take is to choose a budget and location then compare a commercial property against a residential property in the same budget and location. Measure each property against key performance criteria such as rental return, operating costs, future potential, and return on investment to determine whether a commercial option is worth a closer look.
Warning : – )
As with all investments, there are risks. See our blog titled ‘Commercial property – crazy or easy’ for insights into these. The key is to ensure you consider strategy first – what do you need, what’s your budget, what’s your longer term goal – before considering the type of property or location. If you would like help in developing a strategy around commercial purchases or assistance in making your purchase, don’t hesitate to contact us at Crave.
Buy smarter = limitless ways to build lifetime income
Crave Property Advisory is a unique property strategy and buyers agent service. As the only independent and unbiased advisory that can help you use any property strategy Australia-wide, Crave’s services extend to home, investment and commercial property. A highly client focused organization, Crave developed the Modular Investing System (MI System) to provide clients with the ability to use a tailored mix of strategies and efficiently build profitable portfolios that create lifetime income.
Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business.
Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.
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