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Longer leases provide less stress

Wednesday, 8th Jun 2016

going over contractThe commercial and residential markets can differ significantly, one main point of difference being the length of lease agreements, which for commercial property are weighed in the investor’s favour.

If you’re a residential property investor or ever rented a house or a unit, you’ll know that residential leases are relatively short, typically 12 months or as even as short as 6 months.

As an investor, this means you’ll have to go through the rigmarole of renegotiating the lease agreement quite frequently, provided you don’t utilise a professional property manager.

There’s also the prospect of more frequent vacancy periods, as residential tenants can be more nomadic.

Commercial property is typically different, though, as lease agreements are generally several years and, in some cases, can be as long as two decades or more.

It’s evident that commercial leases are generally much longer than residential.

This is highly beneficial for commercial investors as they don’t need to renegotiate the lease agreements as regularly or worry about finding new tenants as frequently.

However, there are downsides, though, as commercial properties will often experience much longer vacancy periods than residential properties.

It’s not uncommon for commercial properties to remain vacant for several months or even more than a year, while residential properties typically remain vacant for just several weeks or slightly longer.

So as a commercial investors you have to be comfortable with these long vacancy periods, however once you’ve secure a tenant, you’ll have peace of mind that you don’t need to renegotiate the lease for some years.