You’re no orphan when it comes to wanting to know what the most profitable commercial property investments are. Every investor in this area wants to know.
First and foremost, either you or your trusted advisor needs to have done your due diligence and market research – from general information about your ideal location’s local economy and vacancy rates, to surveying the nearby area, investigating neighbouring rental rates and what council and state government infrastructure plans are for the surrounding area.
Just with residential property, location, location, location is important. How visible is the site? What’s public transport or parking like? Are you looking at a high-demand, high-traffic position?
Commercial, industrial or retail sites offering the highest return on investment are most likely ones with multiple tenancies – don’t just think shopping centres or office blocks; think of any kind of mixed-use. Even better if the property is in an area with low vacancy rates.
Fast-growing suburbs, arterial roads, CBDs and areas close to key draw cards such as airports or major shopping centres all locations that add to a potential investment’s attractiveness.
The gold star of property returns is finding a site or a tenant with a triple-net lease or NNN. This is a highly desirable feature because it delivers income with no further out of pocket expense to landlord. NNN tenants are typically 10-15 year leases and in addition to the usual rent and utility costs, also pay all the property’s maintenance, ongoing expenses, council rates, insurance and any other charges. Even tenants on a five-year lease, provide some longevity of return, especially if their current rent is significantly below the market rental – allowing for a potential gain at the next rent review.
The age of the property – newer means high depreciation benefits – the flexibility of its layout for both single and multiple tenants, and the site’s development potential, all add to making your potential more attractive and profitable.