By Ty Blanch – Principal, LJ Hooker Commercial Central Coast
B.Bus (Property Economics), Dip. Mgmt
Over the past two years, the number of investors entering the Central Coast Commercial Property market has constantly escalated – and this is a general trend right across the nation – as a direct result of the growing number of SMSF vehicles being created.
It is not only as a result of the typically higher returns that commercial property offers when compared with many other investment alternatives. Retail, Industrial and Office (Commercial) all constitute the various market segments known as ‘Commercial Real Property’ and currently 8-10% per annum net is commonplace for rental returns, however there are other clear reasons why commercial property is favoured.
The first is longer lease terms. Generally three to five year terms plus options are established in the lease documents, adding security for both the tenant and the property owner. With the residential property, owners may not be able to completely ‘set and forget’ the investment for much longer than twelve months, yet businesses want security of tenure for their premises and may stay in the one location in some cases for decades.
The second visible benefits relates to outgoings. Unlike other property options, the lease can (and most likely will) contain details of outgoings that can be paid directly by the tenant with commercial property. Examples of costs that are payable by the tenant in a commercial investment can include Council Rates, Strata Levies, Excess Water, Building Insurance, Air Conditioning Maintenance, Landscaping & Garden Maintenance and even the Commercial Property Management Fee’s. This means that the ‘true net’ position of the investor is greatly benefitted by the payment of associated expenses by the Lessee.
Another important difference with Commercial Real Estate is the type and nature of construction and use. For example, occasionally residential tenants can leave the premises in quite a state, and carpets, blinds, gardens and even kitchens and bathrooms can need to be completely renovated or repaired. In contrast, Commercial premises are generally easier to maintain and re-let since the common factory or warehouse is constructed of concrete and steel and even retails and commercial premises are occupied by business people who usually leave the premises in a better condition in order to re-claim their (often substantial) bond.
These are only a few reasons why the SMSF market is so eager to consider commercial property as another form of high return capital investment.
As more and more people look for stability, long term commitment (from tenants) and relative ease of maintaining their superannuation structure, it is important for investors to explore the potential of business property as a part of the mix in their Investment Portfolio.
To learn more about LJ Hooker Commercial and view the latest commercial investment properties click here to visit their website.
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