Investing in commercial property versus residential property
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One of the most important things to know about investing in commercial or residential property is that, while there may be similarities between the two markets, they have different investor and occupier profiles. Below are some characteristics to be aware of.
Value
Residential property typically has a lower capital price compared to the other commercial real estate classes. A commercial office, industrial or retail asset typically requires significantly more capital to acquire and maintain. As such, direct investment in commercial property is undertaken by a fewer number of investors who have the required knowledge and financial capacity to purchase multi-million-dollar assets; and the operational capacity to undertake the day-to-day management.
Lease terms
The lease profiles between residential and commercial are markedly different. Commercial real estate leases are usually longer, typically ranging from three to 20 years. These commercial leases usually benefit from fixed annual or market related annual rental increases.
Tenants
Commercial property leases tend to be to quality tenants which generally have low risks of defaulting. These include tenants such as Commonwealth or State government agencies or well-regarded corporations. Good managers undertake comprehensive tenant analysis and target quality tenants through economic cycles.
For more information you can click here or contact the team on the details below.
1300 652 790
direct.property@charterhall.com.au
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