Commercial property is often overshadowed by residential as an investment opportunity, largely due to what we believe is a lack of knowledge of the landscape and what it means to be a commercial property landlord. 

In reality it is not as confusing as it may seem, and in fact, there are many benefits to investing in commercial property over the more popular residential alternative. 

With office and industrial space in Melbourne currently in high demand, now more than ever it is an ideal time to turn your attention towards commercial property and consider it as a viable investment solution. 

To help, we have highlighted some of the key benefits in investing in commercial real estate below – be it retail, office or industrial – and how this differs to residential opportunities. 

1. Leasing demand is high 

Demand for commercial property across Melbourne has remained high across the first half of 2018, led in part by the rising employment opportunities in the city’s centre and the strong rental growth. As a result, there is less risk that your property will not be leased – with work spaces of all shapes and sizes sought across the state. 

In addition, there are many commercial opportunities that include mixed use dwellings, where you will have the ability to lease the space to multiple tenants resulting in multiple incomes. For example, industrial factories, strata offices, retail strips and more can be leased out to multiple businesses, creating more opportunity. 

2. Maintenance costs are payed by the tenant 

Unlike residential leases where maintenance costs fall on the landlord, in most commercial leases the tenant is responsible for any maintenance costs and for ensuring repairs for the premises during the lease term. This means ongoing costs for investing in a commercial property are not as high with commercial landlords generally only responsible for major structural repairs required to the building, whilst all other costs related to walls, floors, fixtures and more sitting with the tenant. 

3. There are higher returns per annum 

Whilst a residential property may have a strong capital gain and the ability to generate you cash upfront quickly, commercial property is generally a better long-term investment as it generates a higher yield over time. Each year you are likely to receive higher annual returns (5 % to 10%) than you might a residential property (3% to 4%), however, you need to be aware it is a long-term game and be willing to wait it out. 

4. Tenant stability

Because commercial properties are leased to businesses, there tends to be much stronger tenant stability with leases generally lasting between three to 10 years, while a residential tenancy can turn over every six to 12 months. This can also be because the tenant has invested a lot more into a commercial property and therefore would prefer to stay in the one location. 

For more details or to speak with one of our consultants, please contact our head office: 03 9654 2311