Q: What is the difference between commercial property and residential property?

Residential real estate is defined by a dwelling whereby a single-family occupies and/or any rental residence up to four units.

Whilst commercial and residential property share common characteristics in that they are both tangible assets, there are several key differences between the two assets classes and they differ extensively in elements of risk, capital, income and returns. Residential real estate includes single-family houses, townhouses, and apartments. Properties include single-family homes, townhouses, and apartments. Commercial property comprises of office space, retail shops, warehouses, industrial buildings, hotels and the lists go on.

When considering investing in the property sector, the key components contributing to your investment’s success include market conditions and property management. If the asset has been purchased at a competitive price and the property is managed correctly, generating income at full potential, then both residential and commercial properties can be a strong investment opportunity.

Q: How has COVID-19 affected the commercial market?

An important takeaway from the COVID-19 Pandemic is the varying impact it has had on different businesses which has had a flow-on affect to the commercial property market. As expected, hotels and tourism have taken the biggest hit whilst the retail industry has also been notably impacted.

The industrial commercial sector is less volatile and is expected to rise out any shocks caused by a Pandemic. The reason for this is partly due to a short-term surge in demand for logistics and e-commerce which has been essential to transporting fundamentals for Australians as they practice routine social distancing.

In response to the National Cabinet’s Mandatory Code of Conduct for commercial leasing to soften the COVID-19 blow on commercial real estate, the NSW Government introduced a $220million Land Tax relief package whereby eligible Landlords are provided access to Land Tax concessions of up to 25% which is passed on through the building’s outgoings. Additionally, with the Job Keeper 1.0 subsidy taking effect from 1 April 2020 to 30 September 2020 and subsequently Job Keeper 2.0 commencing 1 October 2020 and extending out to 31 March 2021 for eligible businesses, the retail sector has been well-protected from the drop in consumer spending during significant downfall periods. More generally, the Reserve Bank of Australia (RBA) has played a significant role in insulating the economy against the impacts of the Coronavirus Pandemic with interest rates remaining at record lows. With low interest rates, the cost of debt decreases and in turn, presents an opportunity to lock in a bank loan for an investment at a viable rate.

Q: How can a commercial buyer's agent add value to my commercial purchase?

Given that today’s increasingly sophisticated sales campaigns are entirely geared to generate the highest possible sales price for the vendor, there is an increasing demand for not only representation of the purchaser but a requirement for professional guidance through the purchase process. A commercial buyer’s agent can add significant value to the buying process:

  • Saving valuable time researching the market.
  • Sourcing the right property in line with your brief.
  • Negotiating the fairest possible purchase price to ensure you do not overcapitalise.
  • Providing you with all the facts to make an informed decision and working exclusively for you with your best interests in mind.
  • Local market knowledge and insights.
  • Access to off-market and pre-market opportunities.

Generally, Commercial property tends to come with higher risk yet higher reward capabilities. It is essential that a commercial investor is equipped with a deep knowledge of the property market to understand the complexities of investing on a larger scale. Costi Cohen are a full-service buyer’s agency with the experience to help you secure a high-return commercial property.

Our goal is to secure the property that suits your needs, whether you’re a first-time buyer or seasoned investor. Acting as your knowledgeable representative, we take a custom approach and do our due diligence to make sure you are buying in the right area and at the right price, for potential returns you can count on. As a full-service commercial buyers’ agency, we start by sourcing every suitable property out there utilising our well-connected affiliated agents to flush out the market, taking clients all the way through to inspections, due diligence, recommendations about fair market value, negotiations, exchange and post-settlement care.

Q: Property Investment vs Property Development?

Property investment refers to the purchase of either a residential or commercial asset specifically with the aim of making a profit. Generally, to generate a return through investment, the property investor will either rent out the purchased premises or resell the property for a higher figure (or both). Prior to purchasing a property, depending on what the buyer’s purpose and intention is with the purchase, will depict the main points for consideration. For example, should the purchaser be looking for an investment property, the key points for consideration surround location, physical condition of the premises, tenant vacancy & lease(s) tenure (WALE), and annual income (if not vacant possession). When looking solely to rent out the property after purchase, a practice called ‘positive gearing’ is the ideal position to lock in. If a property is positively geared, this means the income of the property exceeds the bank re-payments and hence, the borrower is making a profit.

Property development is typically considered more complex than property investment. A textbook property developer will look to purchase a block of land, build the maximum allowable amount of townhouses, units or apartments on the property and sell them for profit once construction is complete. Should the purchaser be looking to develop the property and increase the value of the asset, factors to consider include location, yield, current lease tenure (if not vacant possession), allowable uses as per local council Development Control Plans (zonings, floor space ratios, height restrictions), financial planning, planned infrastructure & supply changes.

Both property investors and developers have the potential to earn significant returns on their investments. The best chance of success lies with those who have a deep understanding of the market, have undertaken the required research, built strong relevant networks and have a sound understanding of each step required throughout the project. Costi Cohen provide the full property cycle service with the experience and expertise across all touch points to help you secure a high-return commercial property investment or development.

Q: What are the top 5 things to consider when purchasing a commercial property?

If you are thinking about buying a commercial property, there are several items to consider before securing your asset. What type of property are you looking for: an investment or development? What type of asset class are you looking for? What is your price range? When is the best time to buy? Can I build apartment blocks in this area? These questions can all become quite overwhelming for a buyer, particularly if this is your first time in the market. The main points to consider are summarised below:

  1. Are you looking for an Investment or Development or both?
  2. What locations are you interested in?
  3. What is your budget?
  4. What is the yield you are looking for?
  5. When are you looking to purchase this property?

Once you can answer the top 5 points to consider before purchasing a commercial property, you have successfully created your tailored buyers ‘brief’. From this point Costi Cohen, as your buyer’s agent, can provide you with a direct approach to properties and capture the entire neighbouring market. This includes properties that are off-market, pre-market, on-market, post market and price reduced stock.

Should you require further information on purchasing a commercial property, we recommend speaking to one of our commercial property advisors.