If you’re entering the commercial property market for the first time you may not know what kinds of properties to select when building a portfolio. Read below for an introduction to the types of commercial real estate that are the most commonly purchased.
There are various types of retail spaces for sale which you may consider purchasing. The most common is a standard retail premises that will suit a variety of business types. The benefit of owning a property like this is that you’ll have a wider variety of potential tenants to rent to. If you’re taking out a loan, banks will typically provide standard loan terms such as the ability to borrow up to 80% of the property’s value. A purpose built retail space will have specific building features that make it suitable for certain businesses. This could include specific plumbing or use of light. If selected wisely in terms of location and function (The Investor notes that Los Angeles commercial real estate recently became second in scope only to London, for example), they can be a shrewd investment but if not, you might struggle to attract tenants if your space is suited to a smaller pool of businesses.
Leisure properties are another popular type of commercial real estate. As a broad category, this could include spaces that operate as hotels, facilities (such as sports or fitness), restaurants, bars, cafes and entertainment venues. Sometimes campsites and caravan parks are also included under this label. Given the scope of this asset, you might wish to research what type of property will best suit your personal situation instead of searching for leisure real estate more broadly. Again, a niche property in the right area can be lucrative, but is risky if is not in demand by potential tenants. For this reason, if something seems like a good deal for what it is, best to find out why before getting excited about a cheap sale price.
Whether you purchase an entire building or an individual space, location is key when buying commercial offices. If you’re not looking to spend big to access a blue chip inner city location, established business parks on the outer fringe suburbs can be another good option to investigate. Many tenants will also seek parking for staff or clients, so consider whether this is something you wish to provide also. For a higher rental return, you may wish to invest in a serviced office that provides additional services to tenants such as staff (e.g. receptionists), fit out and furniture and IT equipment.
As populations grow and the number of elderly rise, purchasing commercial real estate pertaining to the health sector is becoming increasingly valuable. Whether it’s a nursing home in an area that is currently underserviced or a medical centre near a housing estate, healthcare properties will always be in demand. Alternative health care is also on the rise with practitioners in Chinese medicine and myotherapy increasingly opening up in more areas. Be sure to check the zoning to ensure that the specific businesses you have in mind will be permitted to operate.