May 29, 2013

Investing in commercial property - the basics

Commercial property can be a fantastic investment for a number of reasons.

For those who make sensible investments, the gains on commercial property can be huge. The profits on rental payments can be momentous as well.

Many property investors are benefitting thanks to market's slow recovery from the crash of 2007. Most types of commercial property are slowly rising in price. However, they are still 30 per cent lower than their 2007 peak, meaning there is plenty of room left for substantial growth.



Commercial property is a complicated beast though - one that requires plenty of knowledge and research.

What do I need to consider?

Commercial property is incredibly diverse. How are you meant to know whether to invest in office space, retail centres, and industrial buildings...the list goes on.

Many investors like to diversify, hedging their bets to provide themselves with a safer portfolio. Others like to watch trends in the industry, studying property prices, supply and demand in order to make the most intelligent decision on one type of building.

The location of the building is arguably the most important aspect of commercial property investment. This plays a huge bearing on the property price and how much landlords can expect to rent out buildings for. Areas which are easily accessible and have high foot traffic are the best.

London's West End is currently the home of the world's most expensive commercial properties because it is considered to be the retail space with the highest density of high-spending shoppers.

Historically, it has proven to be tough to fill expensive buildings in run-down areas, so make sure to do some due diligence on a building's surroundings.

Managing a commercial property


One unique aspect of commercial property investment is that it requires regular management. Commercial property owners need to find tenants, collect rent from these tenants. They need to arrange property maintenance, make sure that their property is insured, that it's legally safe to set foot in there and pay property-related taxes. Many would agree that's just the tip of the iceberg.

For investors who have even just a medium-sized property portfolio, this could prove to be overwhelming. Many investors pay for commercial software for property management to help them keep up with what needs doing. With the development of this software and the increased connectivity of the world, it is possible to manage a portfolio of properties spread across the whole world.

Others let property management companies take control of all the above tasks for a small cut of their profits.

Long-term profits

Commercial property tends to be a great long-term investment. Prime retail space is a relatively safe investment but the growth in value tends to be slow. Less valuable buildings can be sold at big profits quickly - but are generally riskier investments overall.

A great commercial property investor will have his eye on the market at all times, keeping a lookout for the next hotspot where properties are undervalued. They should also keep a keen eye on their own investments in order to know the best time to sell.

It is a great asset to have if you're willing to work hard.

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