Buying commercial property – Your top 5 questions answered!

By Ashley Rees

The current environment has many investors asking similar questions about the future of the commercial property market.

[1] Should I be looking to buy a commercial property now?
• Always be looking. Knowledge is power and keeping abreast of the market will you give you the confidence to act when you find the property that fits your model
• 140 Investor enquiries since the start of the COVID crisis indicates you are not the only one drawn to the bricks-and-mortar security of commercial property

TIP: Look for opportunities but don’t let them push you out of your comfort zone or away from your investment model

[2] Should I be concerned about property values falling?
• Valuations are generally only relevant when you are looking to sell or looking to borrow. So long as you are investing with the medium-term in mind, this should not be a major issue for most investors
• While there is potential for a knee-jerk reaction to impact bank values in the short term, low stock, ultra-low interest rates, and reduced construction pipeline could help insulate the true “coalface” value that properties actually exchange for

TIP: Keep a comfortable loan-to-value ratio and don’t over-borrow. This will help you ride out any short term valuation fluctuations without breaching your loan covenant

[3] How can I know my tenant will pay the rent?
• There is a definite two-speed economy at the moment, so it is important to invest in the right segments, like industrial, convenience retail and allied health
• With rent most often being the second largest cost in business, behind wages, you as the owner can play a big part in helping your tenant navigate tough patches

TIP: Do your homework on the tenant and the industry before buying. Our in-house enquiry data is a good source of which industries are most active and which are seeking rent assistance

[4] Where should I look to find opportunities?
• Look for the behaviour that is being forced on us today that will be the new norm tomorrow. What industries are we being deprived of and what businesses are meeting that need?
• Look for the industries that will be the likely beneficiaries of post-crisis stimulus investment. Watch for announcements like infrastructure upgrades and job-creation initiatives (solar installation, hospitals, etc)
• Focus on building functionality. Tenants come and go in the best of markets, so don’t be distracted by the logo above the door. Look for properties that will always be attractive to businesses because of their features like car parks, location, access, and inclusions.

TIP: Again, look for opportunities but don’t let them push you out of your comfort zone or away from your investment model

[5] How should I go about buying the property I like?
• The hardest thing to do at the moment not feel overwhelmed due to the flood of mixed messages coming at you. Choose the property that best suits your investment plan and stay focused on that property
• Clean deals are powerful deals in this market. Have your finance in order so you can move quickly on the right property

TIP: When you find the one you like, make an offer. This seems simple but every owner situation is different and the best way to establish their true motivation is to show them your genuine interest

Talk to our team today about refining your search criteria to the properties that will suit you best.

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