06 Dec Factors to Consider Before Buying A Commercial Property
So you’ve decided to buy your first Commercial Property, what next?
Because it’s much harder to find commercial tenants than residential ones and because the sector is more exposed to changes in the economy, buying a property which already has a commercially successful tenant on a long-term lease is the holy grail of commercial property investment.
If you have a reliable tenant in place, you’ll enjoy greater cash flow benefits and rental certainty, and face fewer ongoing expenses, than you would if you stuck to residential property investment. But while it’s arguably the most important, it’s not the only factor you need to consider, when weighing up one property against another.
- the lease and the tenant
- the state of the economy
- the location
- planned infrastructure and supply changes
- the property itself
What factors affect demand for commercial property?
The developments that affect demand within the sector as a whole.
Low interest rates make it cheaper to borrow money, which increases demand for commercial property and boosts prices.
Conversely, high interest rates make money more expensive, which leads to less demand and higher prices.
The average age of a population has a major impact on demand for goods and services, which, in turn, affects demand for commercial properties.
A combination of declining birth rates and increased life expectancy means that Australia’s average age is currently on the ascendancy. Which, among other things, means that demand for some commercial properties, such as aged care facilities and health centres is on the rise.
High population growth leads to increased demand for goods and services, which, in turn, results in increased demand for commercial property.
Of course, population growth is not experienced evenly across the country, and so it’s important to pay attention to the direction of these migrant flows to leverage the benefits they represent.
Article courtesy of Euan Black. To read more of this article visit realcommercial.com.a