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Bigger isn’t necessarily better in commercial property

Tuesday, 5th Apr 2016

commercial property

Many investors envisage city skyscrapers and large shopping complexes when commercial property comes to mind, particularly those unfamiliar with the market. However, bigger isn’t necessarily better in commercial.

Given that much of the mainstream media focuses on these segments of the market, it’s understandable that many investors only think of the big end of town.

Of course, individual investors wouldn’t be able to afford an office tower, for example, as these large assets typically cost a minimum of $20 million and are owned by big institutional and superannuation funds.

But that doesn’t mean individual investors can’t afford a high-quality commercial property.

Indeed, investors should think small when it comes to commercial property, and look to the suburbs.

Commercial space within smaller suburban shopping centres can make a good starting point.

Although retail has suffered with the rise of online shopping in recent years, service providers, such as hairdressers, will continue to need bricks and mortar stores to operate.

Investors should consider suburban shopping centres that are anchored by a large supermarket and also comprise other specialty stores, such as a baker, butcher and chemist, for example.

Similarly, specialty medical spaces, for chiropractors, physiotherapists and general practitioners, will continue to see demand over the long-term and can make great investments.

Investors must be aware of vacancy rates and market rents, though, as these can vary widely between suburbs and property types.

Unfortunately, most of the published statistics on the commercial property market relate to the CBD statistics, so it can pay to engage a buyer’s agent who will hold a firm understanding of the local suburban markets.