The Pros and Cons of Investing in Commercial Real Estate in Sydney
So you’re thinking of investing in commercial real estate in Sydney. But what considerations do you need to factor in and what risks should you look out for? If you’re not sure, we’ll walk you through some of the key points to think about before you invest in the Sydney commercial property market.
What Risks are Involved When Investing in Commercial Real Estate Sydney
Want the good news or the bad news first? Let’s start with the tricky stuff.
- Securing a commercial real estate loan is more challenging than the residential market. When you are applying for a commercial real estate loan, the banks or lending institutions look a little harder and take a bit more time analysing your application. They generally will only lend up to 70% on average which means you are likely to need a larger deposit than what you would for a residential property.
- Commercial real estate in Sydney can remain unleased for long periods of time. The expected vacancy for a commercial lease property in Sydney is around 20%.
What are the Benefits of Investing in Commercial Real Estate Sydney
It’s not all doom and gloom when it comes to commercial real estate Sydney! See - the pros list is longer than than the cons! So let’s end on a sweet note...
- Although it can be a challenge to secure your commercial real estate loan, when you do - the returns for commercial real estate are much greater than residential.
- There’s plenty of commercial real estate on offer in Sydney. Fantastic investment potential is dotted throughout the city - it’s just a matter of working out which best suits your requirements and will offer you the best ROI.
- Although there is a risk of the commercial property remaining vacant for periods of time - the majority of commercial real estate tenancies in Sydney are long term. We’re talking five year contracts which are quite often extended multiple times.
- If you manage to secure a good lease and a solid tenant then this mitigates the risk and can take care of the loan repayments
- Office space is often considered a low risk commercial real estate investment as the lease is generally reasonable and attracts professional tenants such as health & medical, accountants, solicitors etc…
Top Tips for Investing in Commercial Real Estate Sydney
- It is strongly recommended to have some extra funds to act as a buffer for your loan repayments should your commercial investment property experience any long term vacancy.
- As we mentioned - finding the commercial real estate property which best suits your requirements and returns good ROI, securing a good lease and finding a solid tenant are key to mitigating your financial risk.
- That is why you need an experienced and skilled commercial property management partner on your side.
MMJ Commercial Real Estate Sydney have extensive experience in the Sydney Commercial Real Estate market and specialise in commercial leasing. They have the knowledge and the skills to negotiate the best lease for you and match you with right tenant for the best possible return on investment.
Contact us today to discuss your commercial real estate investment needs
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