Breaking news and updates daily. Subscribe to our Newsletter!

Home of the REB Top 100 Agents
Breaking news and updates daily. Subscribe to our newsletter

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

4 reasons investors are shifting to commercial properties

By Noemi Pamintuan-jara
11 January 2022 | 1 minute read
commercial properties

Soaring house prices in Australia are turning away a growing number of investors, and the lucrative commercial property sector is a low-hanging fruit that has captured their attention.

Burgess Rawson chief executive Ingrid Filmer said this doesn’t come as a surprise since, in her opinion, commercial property provides the best returns of any property sector in the country.

“It’s a shift that’s paying off for individuals who’ve dipped their toes in the realm of long-term, ‘set and forget’ leases,” she articulated.

Advertisement
Advertisement

Ms Filmer acknowledged that the “Australian dream of home ownership is as strong as it ever was”, but when it comes to building an investment portfolio, she thinks residential property is a far cry from commercial property.

Here’s the lowdown on the advantages of investing in commercial properties, as given by Ms Filmer:

1. No need for technical knowledge and over-the-top investment

“There seems to be a widespread misconception that commercial property investment is for the ultra-wealthy, or those with a technical understanding of a particular commercial sector, which couldn’t be further from the truth,” Ms Filmer revealed.

She gave a hypothetical example of a good quality investment that will just cost $500,000 to $1 million. Such price points, the CEO said, are “ideal for investors seeking an alternative to the overheated residential market”.

2. Highest returns in the Australian property sector

Taking off from the example in number one, Ms Filmer said such investment could give a return of $30,000 to $60,000 per annum.

To illustrate further, she mentioned a recent takeaway shop that was sold in Altona, Victoria, for $760,000.

“The property was purchased at 31 per cent less than the average home price in that suburb of $1.1 million, and will return a yield of 4.06 per cent – or $30,900 – per year over the course of the seven-year lease,” Ms Filmer calculated.

3. Long-term investment in high-performing properties

The crucial factor here, according to Ms Filmer, is to put your money in high-performing and essential service assets such as childcare centres, fast food retail and service stations instead of letting your money sit unproductive in bank accounts or taking a chance at inflated residential property markets.

“Essential service assets are those that are able to operate at all times, even during lockdowns, and typically demonstrate a high level of resilience to market cycles such as childcare centres, medical centres and service stations,” she said.

4. Long-term lease with fewer headaches for investors

Ms Filmer further added that commercial properties “generally enjoy long-term lease arrangements of between three and five years and the tenants are responsible for all outgoings, repairs and improvements”.

Whereas residential property leases are typically renewed every six to 12 months, and “the owner is responsible for all outgoings, upkeep, and repairs,” Ms Filmer pointed out.

4 reasons investors are shifting to commercial properties
retail strip NSW reb
lawyersweekly logo

Feeling burnt out? The newest event to hit the industry, REInnovate, is a must-attend for serious real estate professionals facing the pressures of a heavy workload. Get ready to walk away with the undeniable structure for success, efficiency and profitability, and get yourself back on track to focus on what’s really important for your business. Get your early bird ticket now.

Tags:

Do you have an industry update?

top suburbs

12 month growth
Manyana
70.61%
Tamarama
70.55%
Box Hill
64.95%
Goodwood
64.38%
Bawley Point
63.64%
Lennox Head
62.11%
Casuarina
62.08%
Queenstown
61.31%
Warana
60%
Cooroibah
59.43%
SEE AREA REPORTS ON SMART PROPERTY INVESTMENT WEBSITE
Subscribe to Newsletter

Ensure you never miss an issue of the Real Estate Business Bulletin.
Enter your email to receive the latest real estate advice and tools to help you sell.