Lucrative Commercial Property Investment Options In Islamabad, Karachi and Lahore

In the last three years, the demand for commercial property for rent is tremendously increasing (specifically restaurants, retail spaces, and warehouses). Rental commercial property rates have gone up by 20 to 25% and prices have been increased by nearly 30%. Despite this, demand for these rental spaces has increased by nearly 20%, making them lucrative commercial property investment options.

If you are planning to invest in a commercial property such as restaurant, retail space or warehouse, factor in the following:

1. Restaurants. The number of restaurants in Pakistan has increased by an estimated 30 to 38% in the last two years. Custom-made spaces for restaurants are in high demand and their return on investment (ROI) ranges between 25 and 35% per year.

Areas where restaurant space is available include:

• Islamabad: Sector F-10.
• Karachi: Tipu Sultan Road and Block 4, Clifton.
• Lahore: M.M. Alam Road

Average sizes range between 400 – 1,200 sq feet.

Purchase Price Range: $ 300,000 to 450,000

Monthly Rental Range: $ 5 - $ 12.7 per square feet

2. Commercial Retail Space. These include commercial shops and commercial stores within malls and shopping centers. Their number has increased by 18 to 20% in the last two years and their ROI ranges between 22 and 25% per year. Retail commercial space does not require a lot of investment and is relatively easy to rent.

Areas where commercial retail space is available include:

Islamabad: Sector F-10. Giga Mall, Aquatic Mall, and Gulberg Greens.

Karachi: Clifton and Defence Housing Authority.

Lahore: Block Y, DHA, Gulberg and M.M. Alam Road

Average sizes range between 500 – 1,000 sq feet.

Purchase Price Range: $ 230,000 to 650,000

Monthly Rental Range: $ 2 - $ 15 per square feet

3. Commercial Warehouses. Due to increasing industrialization, the demand for warehouses has increased by 12 to 15% in the last two years. Initial investment and maintenance costs are lower compared to other commercial spaces; this makes them a popular choice for investors. Their ROI ranges between 15 and 20% per year.

Areas where commercial warehouse space is available include:

Islamabad: Sector I-9 and I-10.

Karachi: Hub and West Wharf

Lahore: Multan Road

Average sizes range between 500 – 3,000 sq yards.

Purchase Price Range: $ 1,500,000 to 3,650,000

Monthly Rental Range: $ 6 - $ 27 per square yard.

Eight Factors to Consider While Investing in Commercial Real Estate

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%.

4 Easy Tips for Investing in a Commercial Property

Investing in commercial property is an option that many investors considers from time to time as a way to expand their asset portfolio. Commercial property options for investors usually includes office spaces, retail spaces, stand alone shops and vacant plots.

Here are a few things to consider when purchasing a commercial property:

Location. Owning a retail space in certain commercial areas can net in higher rentals and their value also increases at a higher rate. Choose a commercial area where the value and demand of shop is high; shops located among main roads have more visibility, accessibility and are therefore better options. If possible, purchase a commercial property that is located in a specialized pocket such as tailoring hub, computer market or a food street; demand for property there is usually higher.

Weigh your options carefully. Buying a retail space in a mall is a better option than a standalone shop, since retail spaces in malls offer facilities such as security, utilities and a higher number of customers. Similarly, the resale value and the rental yield of an office space are higher when compared to those of a retail space.

Renovating and Reselling. Retail spaces and standalone shops that are sold as many empty spaces (without any renovation work or fittings) are slightly cheaper than those which have been customized according to the kind of business they were being used for.
Therefore, a good option to consider is purchasing an empty space, renovating it, and then selling it for a higher price or renting it out at higher rate.

Vacant Plots. Purchasing a vacant commercial plot in an area that is being developed usually proves to be a lucrative option in the long run because its value and demand increases faster than that of a built-up property.