If you have been reading the news lately, you will be aware of some challenges including high energy and fuel prices cutting into profits and affecting households. The floods in eastern Australia have caused prices of many food items to increase. And with inflation running at a 20-year high, the Reserve Bank of Australia is raising interest rates. While Australia doesn’t have the inflation levels of the US or Europe, the bank is not comfortable with the current level of 5.1% CPI and they will do what they can using monetary policy to keep inflation under control. It is expected that interest rate rises will continue throughout the remainder of 2022. Uncertainty has affected the stock market; the Australian Stock Exchange 200 accumulation index (a group of stocks that represent the market) fell by 12% in the June quarter.
This tells us that investing in real assets (real estate) is a wise move that will balance your investment portfolio. Commercial property gives more stable earnings over a longer investment time frame.
Why Mount Gambier commercial property?
A global investment megatrend, the shift to including real assets in an investment portfolio means investors have a more defined cash flow.
Mount Gambier is benefiting from the move to regional, high government investment in regional Australia, the location (especially important for warehouse and logistics assets) halfway between two major capital cities, and current interest in moving businesses to regional Australia. In capital cities, industrial in particular is sitting at a 1% vacancy rate and city landlords are taking advantage of the tight commercial rental market to raise rents.
Many operations, including government departments and logistics, benefit from lower rents and in some cases more available space they can find in a regional city like Mount Gambier.
Why invest in commercial property?
If you’ve kept up with our blogs, you’ll have noticed the value of investing in Mount Gambier commercial property. Here are some of the benefits of owning commercial property in Mount Gambier:
1. Higher cash flow
Commercial properties tend to carry greater risk and restricted availability, which leads to a higher dollar value per square metre. Tenants are usually responsible for everyday maintenance, leading to a higher cash flow. Most commercial leases are ‘net’ leases, which means the tenant is responsible for council rates, insurance and land tax.
2. Lower tenant turnover
Commercial tenants take a lease on a property to run a business or provide services. As long as the commercial premises offer them what they need, they are more likely to occupy your property for a greater number of years consecutively, increasing your return on your investment.
3. Annual rent increases
Most commercial leases have an annual rent increase built into the lease that sometimes takes CPI into account. Alternatively, the lease may include a fixed percentage increase or market review assessment.
4. Higher return on investment and yield
You should expect a rental yield of somewhere in the range of 5% to 12%, depending on the type of property. Commercial properties are nearly always cash flow positive.
Why use a property manager for a commercial property investment?
Our property managers can take all the stress out of managing your investment. Their duties include:
- Invoicing and collection of rent
- Reviewing leases and liaising with tenants
- Payment and invoicing of outgoings
- Managing cleaning of common areas
- Handling building repairs and maintenance quickly, so tenants don’t experience extended loss of power or water, or suffer leaks.
- Hiring contractors to remove rubbish and to maintain any external areas of the property.
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.