The demand for commercial real
estate (including standalone shops, retail and office space and warehouses) has
increased by nearly seven percent over the last two years. This is because an
increasing number of people are investing in commercial real estate in order to
supplement their incomes.If you are considering investing in commercial real estate, factor in the following:
1. Commercial
real estate is usually 10 to 12% more expensive compared to residential real
estate and the resale value is 7 to 10% higher.
2. Rentals
are 3 to 5% higher compared to a residential property. Security deposits are
higher as well, and range between one and two years, as opposed to six months
for residential real estate.
3. The
return on investment (ROI) for commercial real estate ranges between 6 and
12%and is considerably higher than that of residential real estate which ranges
between 2 and 4%.
4. Rental
agreements for commercial real estate usually last for anywhere between 3 and
10 years. This ensures a steady cash flow for owners, and minimizes the need to
look for a new tenant every few years, which can be the case with residential real
estate.
5. Amenities
that attract tenants interested in renting retail and office space include
round-the-clock security, ample water supply, back-up generators, reserved
parking and elevators, as well as effective fire and security alarm systems.
6. Once
vacant, it takes longer to find a suitable tenant for a commercial real estate
compared to residential real estate. As a result, commercial real estate tends
to remain vacant for a longer period of time. Furthermore, if a commercial real
estate remains vacant for more than six months, the value decreases by three to
five percent.
7. Areas
attracting the most investment include multistory buildings located on the
outskirts of city and as well as coastal areas.
8. Prices
of commercial real estate (including plots, standalone shops, and office and
retail space) are expected to increase by 10 to 20% this year and rentals by 15
to 20%.
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