Which Type of Commercial Property is Worth Buying?

Explore the most valuable types of commercial properties to invest in, from office spaces to retail locations, and find the best fit for your business goals.

Residential real estate has always been seen as a safe option for people looking to build a retirement fund or create a secondary income. However, in recent years there has been an increased interest in commercial real estate.

There’s a good reason for this, commercial real estate generally provides bigger returns. It’s normal to set higher rents for businesses because they can afford them. In addition, the minimum business lease is usually five years. Residential leases can be as short as six months.

In other words, you can charge more and you’ll be more likely to see your money. Bear in mind, the global commercial real estate market is worth USD 37 trillion and one-third of this value is in North America!

We’re here to help you choose the right commercial property.

Types of Commercial Property

There are several types of commercial real estate. Each section has its own advantages and disadvantages. These include office buildings, retail, industrial, multifamily properties, and medically-related real estate.

It’s also possible to purchase land to build on. Of course, you’ll need to have the funds to finish your build before you can start earning from this type of commercial property investment. You should note, that commercial land can be a great wealth-builder but it takes more effort.

Things to Consider Before Buying a Commercial Property

The good news is that almost any commercial property is worth investing in. However, before you make an offer, you should consider the following.

Your Intentions

Take a moment to consider what you want to do with your building. For example, if you want to take an office building and rent it after making some creative changes, you’re probably best off starting with either an office building, an empty shell, or building your own property.

Equally, if you want to purchase a commercial building and sell it for a profit, you should know that buying and selling commercial properties is a slow process. It’s unusual to release funds quickly.

Investing in commercial property should be seen as a long-term project. This will allow you to enjoy the rents received and potentially see an increase in property values.

Of course, once you’ve decided on a property, you’ll need to make sure there is demand for the type of property you wish to buy. That means undertaking market research.

The Right Location

Deciding what type of property you want is important. But, as with anything in real estate, it’s location, location, location.

The right location will depend on what type of property you’ve decided to buy. For instance, with so many businesses going online, keeping a retail property full can be challenging. However, despite the increase in remote working, office space is in high demand. This isn’t true everywhere.

Take a look at the top commercial properties for sale in Edmonton, and you’ll find a mixture of retail, land, and office. When you check the industry stats you’ll find that office space is very popular in places like Edmonton, Toronto, and even Vancouver. In contrast, demand in Calgary is slipping.

That makes office space a good investment in three out of four of those cities.

Location is everything. It’s not just whether there will be tenants looking for property. It’s whether your location will benefit the business they are creating or moving.

Office and retail properties should be near amenities, allowing staff to purchase things in their lunch and businesses to sell their stock. In contrast, industrial units, especially factories, are usually better situated on the outskirts of the town. This reduces their impact on residents.

There’s a lot to think about with location, but getting it right is essential.

Don’t forget that commercial properties tend to need less looking after, the tenants are generally responsible for maintenance. That means you don’t need to buy one in your home town, you can shop anywhere in the world.

Finance

You can access commercial mortgages, bridging loans, and secured loans through specialist banks and private lenders. It’s normal to need a larger deposit than when purchasing a residential property. Lenders often ask for 20-30% as a deposit. You’ll also have a shorter period to repay the loan.

However, the rewards can be significant.

You will need a cash flow forecast to secure a loan. This highlights the expected income and expenditure, illustrating that your commercial real estate project is viable.

The key to successfully purchasing a commercial property is to organize your finances before you start looking.

Summing Up

The bottom line is simple. All commercial properties are worth buying, provided the building is located in the right place and being sold at the right price.

Only your research can tell you whether the one you’re looking at fits the right description or not.

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