Why invest in Commercial Property

As a property manager, who has primarily managed residential properties, my eyes were recently opened to the fascinating world of commercial property investment. The Commercial Property Sector is an area that I feel is lacking some visibility when it comes to people thinking about investing in property.  This is potentially because not all agencies offer commercial management, but as I have recently found, there are few property managers in our marketplace with a real understanding of how Commercial Leases and Finances work.

Did you know that, if you have a well structured lease in place, commercial investments key advantage lies in the ability to pass on many of the operating expenses to the tenants.  Whilst some commercial investors may opt to secure a Gross Lease inclusive of outgoings, I feel that exploring the Net Lease option provides better control over recoverable costs. With a Net Lease, you can more accurately pass on expenses and manage tenant expectations when it comes to budgeting for potential cost increases.

The following costs could be recoverable by your tenants:

• Repairs, cleaning, gardening, pest control, property compliance and maintenance – excluding Capital Expenditure items
• Property Management Fees
• Building Insurance
• Land Tax and Lease preparation Fees (unless you have a Retail Lease)
• Body Corporate fees (Not sinking fund contributions on a Retail Lease)
• Council rates and Water

In summary, stepping into the world of commercial property management could provide you with a more predictable investment opportunity, particularly with the guidance of a professional who truly understands how to manage these lease structures.  Having ability to pass on many of the operational costs to tenants, along with long-term leases and higher yields, are certainly factors that make commercial property investment worth considering.  Let explore deeper on those topics in my other blogs.