Commercial property investment remains something of a best-kept secret – except among those active in the space, especially investors who already have or are putting together a portfolio of assets.
Residential real estate investment tends to be the first instinct, particularly for “mum and dad” investors, but the reality is that commercial property generally offers a much better return, especially when cash flow is important, as it can be for, say, retirees.
Ken Kong of TP Dynamics says there are certain rules to follow when contemplating a commercial property investment.
“There are many factors to consider, and it can be a more complicated journey for the new investor than might be involved in a residential investment,” he says.
“Spending time in understanding and building knowledge of the commercial property environment will pay dividends and may help avoid making an expensive mistake.”
Kong says there are many different classes in the commercial space, including office, retail, warehouse, hospitality, medical, recreation and many more.
Retail is one type of commercial investment Photo: Supplied
“Each of them comes with their own dynamics along with different cost profiles,” he says.
“For example, if an owner – in negotiating with a prospective tenant – agrees to help with fitout costs, then a warehouse might cost much less than, say, a restaurant that will need a commercial kitchen, cool rooms and more.”
Potential investors also need to carefully consider location, an equally important factor in commercial property as it is in residential.
“Location, location, location is the key in both classes, but there’s a further drill down in commercial,” Kong says.
“For example, a light commercial space is right at home in a location like Fyshwick, but it might not do so well if it was opened in, say, the Inner South.”
Hospitality investments can be costly due to kitchen fit-out expenses Photo: ASHLEY ST GEORGE