Estela Guidote, Commercial Business Development Manager discusses the top things investors should consider when purchasing commercial property.
I read an article recently by Cavell Leitch on ‘Commercial Property as an Investment Option? – 5 Top Tips’ and it listed (unsurprisingly) the location as the top thing to consider when investing in commercial property. As with all property purchases, the location plays a major part in how your property will operate. The article outlines how you will need to have a good understanding of the area and the types of tenants the property will attract. Is the property in an up-and-coming area? Or is the area already well established with a great community feel? You will also need to consider the surrounding buildings and who leases them, as well as the zoning and accessibility of the property from a roading and traffic perspective. Plan for the future and consider what development might be in or near your property later down the track which might affect your investment.
After location, the second thing that investors should consider is the building itself. When purchasing a property, whether it be for commercial or residential purposes, a pre-purchase inspection (of the building and all chattels) by a qualified professional is essential. When it comes to commercial property the article highlights that there are extra things to consider such as:
- The structural integrity/strength of the building relevant to an independent engineering report indicating what percentage the building is New Building Standards [NBS].
- The presence, location, and condition of Asbestos (relevant to Health and Safety regulations).
- An earthquake repairs report for areas susceptible to earthquakes may be needed relevant to EQC provisions.
The third tip discussed was the use of the building. Commercial property investors should consider if the building will be:
- Owner occupied in all or some part of the property.
- Tenanted. It is advised to thoroughly research each tenant to ensure quality tenants and increase your occupancy rate. As an investor you will also need to seek property valuation advice as this is important when setting the rent levels as this will determine if the yield of the property is above, below or at market level. Also factor in car parking as this is an increased issue for tenants and for their customers especially in a multi-tenanted building.
The fourth tip for commercial property investors is to ensure you are familiar with the property title and your obligations. The most common forms of commercial property is either free hold or unit title. Unit title properties are governed by a Body Corporate meaning that both you and your tenants will need to follow the rules of the Body Corporate. As APM has a Body Corporate Management division that looks after over 200 Body Corporates, we have the experience and expertise in unit titles and in what should be considered when investing in a Body Corporate property, so we are able to help you understand how your property will operate.
Last but not least the fifth tip outlined in the article was in relation to managing your investment. If you invest in a property you will need to decide how it’s going to run, will you manage the property yourself, or will you engage a professional property manager instead? Commercial properties, especially multi-tenanted properties, require lots of time and experience in order to ensure the property is being managed so that you receive a positive return. This is where the Auckland Property Management Commercial Property Management team can help. We look after everything for you from liaising with tenants and ensuring lease documents are accurate and thorough, to making sure all relevant legislation is being adhered to, and the property is cared for.
With the view that most commercial property is a good investment option, our Commercial Property Management team acts on behalf of a variety of landlords and tenants throughout Auckland and parts of the North Island. Our team has a wide variety of experience and we ensure that due diligence is carried out so we would be happy to discuss what we are seeing in the market to make sure you’re considering all the factors involved.
If you are considering investing in any type of property we would advise that you do your homework.
If you have questions on investing in commercial property, or if you already have a commercial property and want to know how you can maximise your returns while minimising your risks, then contact Estela Guidote of the APM Commercial Property Team today.