Given the historically low interest rates and rising rental prices, especially for retail, those setting up a small business might find it’s cheaper to buy a property than it is to lease it.
Savvy business owners also recognise the value of capital growth and the opportunities for improvement to increase value.
But what do property investors look for in a commercial property? While commercial property recently has seen great demand, especially from interstate buyers, investors understand they’re investing in the future of business in the region.
Top commercial property advantages commercial investors consider include:
Retailers will readily lease a commercial property that offers foot traffic; for an industrial park or warehousing, ready access to parking with fewer noise controls could be more attractive. When commercial property investors analyse a commercial property and its location, they check to see if property costs in the vicinity are comparable, and the building is close to larger industrial clients, other complementary industries, and necessary infrastructure (rail/airports/heavy vehicle access)
As the pandemic changed our work models to WFH or hybrid work models, employers looked for scalability and more flexible spaces. At this point in the economic cycle, business owners and CEOs are looking to convert office space, to move from a head office model to more of a hub-and-spoke approach, or to reconfigure space to enable more social distancing between employees while addressing the new world of Zoom, Skype and Teams by providing high-speed connectivity.
Investors will like to see a property, be it office space or warehouse space, that can be reconfigured easily to accommodate changing needs. Smaller properties especially need to demonstrate the best possible use of every square metre.
Green buildings attract premium tenants, lease for longer periods and attract a premium price. With green buildings, investors can reduce their portfolio risk; green commercial buildings have broader appeal and can attract higher rents while maintaining their value.
Pre-leased commercial property and positive cash flow
While commercial property investors might be prepared to take a risk on an unleased property, most investors prefer to purchase a property with a robust lease where tenants are responsible for outgoings.
Unlike residential properties, growth for commercial buildings is not so much capital growth as yield. Commercial property investors will look for positive cash flow.
Open space for vehicles
Especially for industrial commercial buildings, employers want to see that their employees can drive to work and park safely. Most businesses in industrial buildings need good truck access and turning areas, pick-up and delivery docks and customer parking.
Seeking and retaining employees has high extrinsic costs. Therefore employers like to see well-maintained, renovated or new amenities such as toilets, kitchens and air conditioning in office or retail spaces. Investors will take these amenities into consideration when viewing a commercial property for sale.
Potential for value add
While most investors prefer a leased property with modern facilities, some investors will be looking to add value to their commercial property; for example, through reconfiguring warehouse space into smaller units, or modernising an old building to make it smarter and more sustainable. This provides greater tenant attractiveness to increase rent potential and therefore increase property value.
Why invest in retail?
Over the pandemic we saw a massive shift to online shopping, accelerating an existing trend. However, while bricks-and-mortar stores suffered during lockdowns, in regional centres they are making a comeback with innovative business operators combining traditional shop fronts with dynamic and creative online offerings. The pandemic has also increased the move to self-employment and many of these newly self-employed will require a shop front.
Why invest in industrial?
We classify industrial as warehousing space, manufacturing or research and development complexes. Demand for warehousing space is outstripping supply, especially flexible warehousing with an office component.
As all these types of operations require administration, the better industrial buildings incorporate some office component. Industrial spaces with good office space will attract higher rents.
Why invest in offices?
Although the pandemic gutted offices in metropolitan CBDs with many employees working from home, some businesses such as solicitors, accountants, doctors and other professionals prefer to build trust by having a physical presence. The demand for office space from these types of tenants is consistent, particularly in regional centres like Mount Gambier, Geelong and Hamilton.
Can we help with your Mount Gambier commercial property?
Call Herbert Commercial on 08 87 250 500 for a complimentary annual investment portfolio assessment. From this assessment, feedback may warrant the need to seek Herbert Commercial’s advice and expertise with formulating a plan to action restructuring or renegotiating the best lease scenario moving forward. We’re here to help.
As the only dedicated commercial property agency in Mount Gambier, we have a network with and are sought after by national commercial agencies as a trusted extension to their services. Our wealth of commercial knowledge of the Mount Gambier market extends to the broader commercial market, meaning we can ensure you achieve your commercial property goals.