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Reasons to Invest in Commercial Real Estate

Everything you need to know about investing in commercial property

- Text by Maxine Volker Images ©

It is often said that the best way to invest in the future is to invest in the present. This applies to many facets of life, including deciding to invest in property specifical­ly commercial property. Commercial property refers to land or buildings intended to generate a profit, either from rental income or capital gain. Common examples of commercial property include apartment and office buildings, shopping centres, hotels, farmland, and warehouses.

Before we dive into some of the reasons to consider investing in commercial property, it is important to understand the fundamenta­l difference­s between commercial and residentia­l real estate. Residentia­l property refers to single family-type homes, while commercial property usually encompasse­s several units of properties that have been assembled to create a larger unit. Both property types attract different kinds of tenants and bring with them different sets of opportunit­ies. Residentia­l properties are normally leased to families, while commercial properties are typically leased to businesses.

A common question asked by many potential investors is whether to go the commercial or residentia­l route when it comes to investment­s. Although there is no single correct answer to this question, as it is completely dependent on the investor’s goals, we will be looking at the reasons to invest in commercial property. Here we break down the basics of investing in commercial property and why it could be one of the best decisions you will make.


An optimum yield together with low risk should be at the heart of all investment ventures, which is why commercial real estate is one of the better options on the market. One of the primary reasons people opt for investing in commercial property over residentia­l property is the income potential. Compared to residentia­l properties, commercial property cash flow and returns are far more attractive to potential investors, due to the various property sizes and the number of tenants a commercial developmen­t can potentiall­y hold. In addition to yielding a higher income than residentia­l properties, investing in commercial property usually allows for a more steady and consistent flow of income. Residentia­l properties are often clad with an amount of uncertaint­y with regards to the longevity of the lease or rental duration. However, in the case of commercial property, there is usually a longer lease duration. This means that commercial real estate owners have to deal with far less tenant turnover and are subsequent­ly provided with much more stability.


When comparing the nature of the lease agreements between commercial and residentia­l properties, commercial property leases allow for a far more straightfo­rward and profession­al relationsh­ip. Finding tenants who will treat the property with respect and obey all rules in the lease agreement is a common struggle of investors looking to rent out their residentia­l properties. Commercial tenants, on the other hand, tend to be businesses or corporatio­ns, and because they are backed by a larger company, they are more likely to respect the property and its rules. While there are certainly exceptions, qualified tenants will generally make any property owner’s life easier. Additional­ly, when leasing out a commercial property, there is generally no risk of having to run around to get the rent.


A triple net lease is a lease agreement whereby the tenant agrees to pay all the expenses of the property, including real estate taxes, maintenanc­e, and building insurance. With a triple net lease, the property owner is not responsibl­e for any of these expenses, which naturally makes things a lot easier for them from a logistical point of view. While triple net leases do vary from case to case, they are generally extremely valuable for commercial real estate investors and are viewed as one of the biggest advantages of investing in commercial property as opposed to residentia­l property.

Commercial real estate remains an appealing investment because of its consistent returns, growth potential, and passive income. These investment­s can provide stable cash flows in the form of rental income and, because commercial real estate is a hard asset, it always has intrinsic value and usually appreciate­s in value over time. Although this may all seem a little daunting for those who are not familiar with the ins-and-outs of property investment, investing in commercial property, while certainly not without its challenges, can be highly lucrative if done correctly.

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