Thinking of diversifying your property portfolio? Commercial property might be an avenue worth exploring.

Commercial property does offer some great returns and while commercial property leases do often take a bit of negotiation as there are more points to consider compared to a residential lease, commercial leases tend to be for much longer; in fact, anything from 1 to 20 years. This long-term security of income, unless any major disaster happens, is often a great attraction for many commercial landlords.

Furthermore, in commercial property, the tenant shoulders a lot of the responsibilities. Unlike residential property, where the repairs and maintenance are the landlord’s responsibility, many of these types of obligations fall to the tenant in commercial property.

Generally commercial tenants take really good care of the property too – mainly because they don’t want the property to reflect on their business!

The downside of commercial is of course is it’s very reliant on relatively good economic times. Unlike residential, where everyone needs somewhere to live, business isn’t necessarily that constant; businesses do fail and in bad economic times, it may result is property sitting empty for an extended period of time (12 months plus).

That said, there are some excellent commercial opportunities available for the canny investor. The key, like residential property, is to do your homework on the different types of property and look at what tenants you want to attract.

Industrial

These are generally large buildings, open buildings and include warehouses, factories and workshops. Tenants are usually businesses involved in manufacturing, storage or transporting. It includes warehouses, factories, workshops, container and shipping yards, and research facilities.

While industrial properties offer the benefits of long leases and great returns, they are not renowned for their capital growth.

Retail

These come in all shapes and sizes! Tenants vary from cafes and bars, clothing and gift shops to services such as hair dressers and gyms.

As retail property is a space for a business to sell goods or services to consumers, the location is vital for the business. Properties in prime locations with lots of foot traffic will therefore demand higher rent per square metre than other commercial property.

The major downside of retail property is that in bad economic times, the building maybe sat empty for extended periods of time.

Office

Again, commercial properties for office space come in all shapes and sizes. Tenants will be professional service providers, such as financial, legal, marketing, administrative or consulting services.

Investors in these types of often benefit from long leases and a well-maintained building. The downside is they often require parking, which can add to the purchase price.

When you’re doing your research into areas and the commercial market, make sure you know what’s planned for the area. Always talk to your financial advisor and other professionals so you can fully understand the risks involved.

As one of Newcastle’s longest established real estate offices, we’ve helped hundreds of people realise their financial dreams through both commercial and residential property. If you’re interested in finding out more, get in touch by giving us a call on 02 4954 8833.

Or send us an email to mail@apnewcastle.com.au or pop into our Cardiff office for a chat.