Why Commercial or Retail Property is a Good Investment Vehicle in Queensland

city buildings at night

Its times like this that we can easily see the benefits of investing long term in Brisbane property and particularly commercial and retail property.  On average, investors keep the commercial property for about 5 to 7 years; sometimes longer.  After that, they know what they can do with it when it comes to diversity, enhancement, or repositioning.  That is where investment strategies can bring value to a property or property portfolio

Investment changes can be in buying more properties, and or to sell, develop, or refurbish.  Some property owners use the capital gain from their investments over time to refinance or improve their portfolio.  Commercial and retail property is interesting and sometime challenging.  It is supported by business sentiment and local area demographics.

building facade
Quality property assets are always of interest.

Investment Strengths and Weaknesses

Certainly, mistakes are made by some investors (as in all investments) but the retail and commercial property market remains a solid investment vehicle over time for many astute investors.  Why is that? It is not hard to understand; it just takes a bit of knowledge and ongoing market research.  The returns from commercial and retail property are generally better than residential property over time although the higher cost of the asset class can delay some people from entering the market.

Know Your Location and Property Types

What can you do with this in Queensland?  Do your research into the property types and see what appeals to your plans.  Find a good real estate agent that knows the location, the property types, rents, prices, and the changes of activity in a location.  Here is a checklist to help you do that:

  • What property types do you know something about?
  • Can you focus on quality investment property in your location?
  • Have you visited your bank or financier to assess your lending position?
  • Can you hold your assets for the longer term or are you a short-term holder?

If you need help with any of these concepts in Brisbane or Queensland, contact Specialist Commercial Agent, John Highman on 0417221108

How to Make Every Lease Count in Investment Property in Brisbane

money on table

When you own commercial property or retail property in Brisbane or Queensland, the leases that reflect the tenancy mix are the foundation of the cash flow.  In many respects it is the cash flow that attracts other investors to the property when a sale is forecast.

Then when it comes to selling that property it is the leases and the cash flow that will drive buyer interest and ultimately assist in getting a better price for the property.  So, the best idea is to negotiate your leases carefully with due regard to the future of the property and your investment targets.  Ask plenty of questions.

city building high rise
Look at Your Investment Property Comprehensively

What About the Tenants?

Another thing to remember here is that not all tenants are good tenants.  You must look at a tenant comprehensively before the lease transaction is accepted.  The things to review with a tenant occupancy include:

  • Where they are coming from
  • Lease history from other locations
  • Landlord comment from other locations
  • The tenant’s ability to pay the rent for the long term
  • The existing cash flow from the property
  • The incentive that the tenant is looking for

A property with a good lease profile will create property investor interest; it’s that simple.  It then stands to reason that the lease negotiations that occur in your property should be carefully planned and optimised.  You never know when you want to sell or refinance your property.  The leases that you have in existence will be the attraction to support your marketing processes and investment needs.

building entranceway
Attract your tenants to your property with optimized leases.

Look at the Leases and the Overall Tenant Mix

So, what can you do here as a property investor?  Look at all your leases and the broader tenant mix.  Set some rules and standards about these things below and then see a good solicitor to help you with the lease creation:

  • Rentals
  • Rent review timings and standards
  • Option terms
  • Make good provisions
  • Lease terms and conditions
  • Ideal tenant type and operations

When you make every lease count, the property starts to take on a whole new level of performance in its asset class.

The Advantage of a High Quality Lease in an Investment Property

retail shopping mall

So many landlords today in Brisbane and in Queensland negotiate a lease agreement with a tenant and do not think deeply about the elements of any lease to be created.  They just leave the lease to their property solicitor to formulate. 

Certainly solicitors know what to do in creating a lease, it’s just that they do not always know much about the property in question.  More often than not, the solicitors working on the lease documentation will have not seen the property at all.  That then leaves the opportunity wide open for a lease document to be prepared that does not specifically match the uniqueness of the property.

woman checking fruit in shop

Retail Properties are Different

When leasing office or industrial property the terms of a lease can be fairly standard, but when it comes to retail property the lease should be specially structured for the investment plans of the landlord and the function of the property. 

Retail property is very much a vibrant and active type of investment.  Things can happen at any time involving tenants, landlord, or customers.  That is where a good property solicitor will review the lease, match it to the needs of the property, and then balance that with the investment plans of the landlord.  Proof of this fact is that most large properties will have a special lease formulated by the solicitor acting on behalf of the landlord.

How to Watch the Commercial Property Market for Opportunities

At times like this there are significant changes going on in the commercial property market in Brisbane, and many opportunities around.  If you have spare funds available to put into the purchase of a new commercial property, there is no doubt that good opportunities exist.  It’s a matter of what you are looking for and how much you can spend.

There is a balance being reached between sale and purchase; it’s a process of cycle and value.  The buyers can be selective, the sellers must be realistic on price outcomes, and the available funds to transact a sale are less available than say 2 years ago. The banks and finance groups are more selective on loads and loan qualification.  First time buyers of commercial property need to provide a good financial history and a strong net worth position that underpins the loan position.

What is a Property Cycle in Commercial?

This is a property cycle and we have seen it before; after years of high demand and high prices, the values reach a level where buyers are more selective and slower to react.  In saying that, a quality property will always attract attention; it is just a matter of what price can be achieved.

So many people have said that ‘timing is everything’ when it comes to property investment; today is a case in point.  Now is a good time to purchase given that some buyers are more restricted with funds access and may not be able to move on even the best of properties.  

Well positioned buyers and property investors are in one of the best of markets right now.  They can pick and choose the properties they like; they can strike a reasonable bargain without being too eager or pressured into a transaction.

woman using computer

Things to Look for in Investment Property

So, what should you look for in the property market and with commercial or retail properties?  Try some of these things to monitor in your preferred investment location and or property.  Properties with:

  1. Good tenant profiles and companies or tenants of substance
  2. Good tenant mix that balances customer interest and business sales
  3. Great location for ongoing business
  4. Solid lease documentation that supports the investment factors in the property
  5. Low threat of vacancy over the coming years
  6. A history of solid income growth and low risk of income loss in the future
  7. Good controls on expenditure and budgets to support that
  8. Long term anchor tenants of stability and popularity

So why would a property investor sell one of these great investments?  Simply because right now many property investors must sell; they must reposition their financing and larger portfolio.  This is a great opportunity for those that can buy commercial and retail property.  Timing is a good leveller for those that can wait for the cycle to come back.  Right now, it’s back; it’s a buyer’s cycle in commercial property.  It is a good time to invest in commercial and retail property right now and over the coming 12 months.

Why Commercial and Retail Property Managers are Special People to Help Investors

city highrise buildings

Many property owners in Brisbane think that they can manage their own property and some invariably do, albeit at times poorly.  It’s a common problem.  There are just too many things in property performance today for most situations of owner management to be completely successful.  

Many owners of investment property make property management choices based on cost first and legality or practicality second; that then leads to risk, redundancy, and low-grade investment performance.

Costs of Property Management

Are the cost savings in self-management worth the trouble for a landlord?  Perhaps in a simple single tenancy management the owner self-management process might work; as however, a property becomes more complex with several occupants and or leases, a professional property manager is a better solution in most cases. 

There are plenty of agents around with property managers on staff, however that is where another problem evolves; the experience of the property manager may not be relevant or deep enough for the particular property type and or client.

Challenges of Property Management

Let’s take things a bit further.  There are always challenges in commercial and retail property management.  Think about these things for starters:

  • Negotiations with difficult tenants on leasing and occupancy matters
  • The gathering of comparable market evidence from other leased properties
  • Strategic tenant retention and lease negotiation
  • Vacancy marketing to reduce the problems of loss of rent
  • There are differences to consider in office, industrial, and retail property management

There are other things to add to the list. Rarely will a property owner have enough exposure to the local property market to really understand what comparable situations, vacancies, rents, and prices are currently. 

The property owner can also make mistakes with lease and tenant matters simply because of a lack of understanding when it comes to up to date lease interpretation, and full property market information. 

shopping mall

Things to Look for in Property Management Today

Here are some other key elements of market intelligence that are critical to the property management process.

  1. Latest updates on property types and market rentals for comparable properties.
  2. Access to a local business database of tenant enquiry across property types.
  3. Knowledge about lease incentives in today’s market and how they impact a new lease deal
  4. The ways that a vacant tenancy can be marketed for best enquiry and lease occupancy
  5. The different situations of gross and net rental that can bring benefits to the landlord and their investment situation
  6. How to qualify tenants in the current market.  Some tenants will not share their full business details and or lease requirements.
  7. Knowledge about levels of outgoings in the local area and how they are structured into new leases today

So, there is a message here.  A good property manager or real estate agent with a large team will understand these things and help the property owners appreciate what is possible with the investment property; that will then allow strategies to evolve. 

people walking in shopping mall
Understand the complexity of retail property performance.

An experienced property manager or leasing expert will also make clear recommendations about how to minimise the risk of vacancy and the time on market with existing vacancies.  Its all about strategy and experience.

When occupancy is sorted for the property owner by a chosen property manager, the other issues of property performance can be escalated into a strategic property plan.  Those issues will be prioritized including:

  • Lease documentation review
  • Tenant meetings and interviews
  • Contractor interviews
  • Property handover checklists
  • Critical date assessments over the coming leases and investment cycles
  • Income and expenditure reviews for budget performance assessment
  • Maintenance planning to allow property compliance and safety planning to codes
  • Vacancy reduction plans
  • Tenant retention plans
  • Refurbishment and capital works programs

So, there are plenty of reasons for a property owner to seek outside assistance in managing their property; it’s worth the money and the fees paid.  The only question now left to investigate the is if the property manager has the experience and the business disciplines needed to control the asset efficiently for the future.

How to Find Tenants Faster in Commercial Investment Property

shopping mall and retail shops

When your property becomes vacant it can be a real worry.  It is the same for any landlord in Brisbane and in greater Queensland.  As the online pressures shift and change, the way companies transact business today has a direct impact on property occupancy, be that in leasing or ownership.

Why is that?  Companies today are more ‘mobile’ and the sales force can spend most of their time out of the office.  Everything that they need to create new business, or place and order is typically in the ‘cloud’.  The size of average office premises for a given today is smaller than what it would have been five years ago.

So, that then presents some problems. In precincts and property locations it can take some time to find a new and willing tenant that has the integrity and business stability to occupy a property.  That leasing process means loss of rent, loss of outgoings recovery, incentive costs, legal documentation costs, commissions in leasing, and the list goes on.  

Market Coverage is Important

A good commercial real estate leasing agent that has a solid coverage of the local property market can be of great value to a landlord today.

So, what can you do as a landlord with your investment properties?  You must stay ahead of the vacancy problem and have a good strategy in place to minimise the vacancy downtime. 

Even in tough markets, vacant tenancies do lease, it’s just that it takes more time and effort on the part of the agent and or the landlord to promote and target the property to the right prospective tenants.

Retail Shopping Mall and tenancies
Retail shopping mall and tenancies have an occupancy focus.

A ‘tenant retention plan’ is a good solution for most investment properties.  In a ‘retention plan’, specific strategies are created such as:

  • Closer connections with existing tenants to ensure full awareness of leasing pressures and business changes.
  • Creative lease transactions that are designed to match the overall mix of the property whilst avoiding mass or multiple expiry problems with several tenants or premises at the same time.
  • Targeted tenant profiles of local businesses to simplify the leasing process when a vacancy is known to be happening or upcoming.
  • Direct marketing of vacant space early, so that enquiry is optimized for vacancies at the right time.
  • Incentive packages that are structured to encourage existing tenants to stay in a property.  There are different incentives available, and a package or alternative packages can be created to suit investment targets in the property.
  • A forward matrix assessment of all tenants in an investment property to allow lease expiry awareness and early negotiation.  That matrix is typically a forward-looking assessment of occupancy looking out to 18 months from current time.
  • Leases that are matched to the investment targets of the landlord and the valuation requirements of the property financiers.

As a landlord, and if you have premises to lease, do not make your choice of leasing agent based on discounted commissions, lower fees, low marketing costs, open listing, or friendship.  None of these things will really help you lease your vacant tenancy any faster.  The result is an expensive and protracted vacant tenancy that is ‘eating its head off’ financially in vacancy downtime and costs.  Your losses will far exceed any gains you think you may get from savings on commissions or fees.

What are the Property Strategies?

When you need an experienced real estate agent to help you lease a retail or commercial property, or any property for that matter, ask them to give you their strategy on:

  1. Advertising to a target market that is relevant to the vacant property
  2. Internet listing initiatives to attract more enquiry
  3. Track record leasing similar local property
  4. Lease terms and conditions that attract tenant enquiry
  5. Database email circulation of your vacant property for lease
  6. Cold calling the business community to attract enquiry from the right business owners
  7. Street by street canvassing of businesses for greater information about your vacant tenancy
  8. Signage initiatives that show the vacancy to its true advantage
  9. Target marketing the property locally
  10. Inspection strategies designed for your property

Such a short list and some yet critical points that are so important when you are leasing property or seeking to resolve vacancies.  You can do so much with these things from a leasing perspective providing your commercial real estate agent supports the process and provides the depth of experience to get the job done.

City Buildings
Know the Brisbane Property Market

One final comment and going back to one key point above; open type listings in a tough market are also a waste of time for the average landlord.  The numerous agents that have your property listed as part of an ‘open listing’ are not really marketing your property intensely.  It is what is called a ‘list and hope’ process when it comes to open listings.

Proven Agent Performance

If you want to lease your property in the shortest possible time, find an agent that has real proven experience in the local area using the 8 points above.  Ask questions about what the agent will do for you.  Get them to show you how they will attract the market to your property.  Make them win your business.  Good real estate agents will do this and give you the confidence you expect as a property investor.

I go back to the point that leasing a commercial or retail property is not about getting discounts from the chosen agent.  It is all about market coverage and strategic approaches to the right local businesses.  A timely lease agreement is more important than any ‘discount’.

The Importance of a Signboard in Commercial Real Estate Marketing

city buildings on morning sky

When you list your property for sale or lease in Brisbane, one of the questions that you will be asked by the nominated brokage agent, is if you want a signboard on your property.  I highly recommend a signboard for one very good reason; it is so effective in immediately tapping into the local property market. 

Brisbane is a vibrant and active city on the Australian eastern seaboard.  It is becoming a ‘gateway’ of products and services into SE Asia.  People interested in local commerce drive through the precincts constantly. It is a property investment ‘hub’.

The seaports and airports in Brisbane are surrounded by industrial and commercial properties serving commerce and manufacturing in Queensland.  The precincts of Eagle Farm, Newstead, Port Brisbane, and Tradecoast, are all thriving precincts are also supporting businesses trading internationally through sea, air, and road transport links.

So, the signboard on your property is quite important.  There are people in and around your commercial investment property that want to know about the sale or lease.  Use the signboard to connect with them.

Important Property People

Who are those people?  For starters they will be:

  • Nearby business owners
  • Local tenants that may need to expand, contract, or relocate premises
  • Investors seeking to expand or change their portfolio

Very often when a signboard is placed on a property in Brisbane, the phone starts to ring within a few hours.  The local businesses and the local property investors will see the signboard and invariably want to know what is going on with the property.  They will consider your property from their perspective with their needs in mind, and that is what you want.

The signboard is therefore one of the cheapest and most effective methods of marketing a property that there is.   Add to that the convenience of the available internet advertising today and you have a basic marketing campaign for your Brisbane property at low cost. 

Value for Money in Property Marketing Today

Where is the value for money in marketing commercial real estate today? Consider these questions:

  • What does a signboard cost?  A few hundred dollars for a generous signboard.  The signboard is a silent promoter of your property in an ongoing way.
  • What does the internet cost?  Can be a few hundred dollars to a few thousand dollars, depending on advert placement, size, and message.  There is long term value in internet-based marketing placement.

It is interesting today to remember that newspaper advertising for commercial and retail property is less effective and still very costly.  Most people that want to sell, purchase, or lease a local property will go to the internet first and will see the signboard as they travel through the local area.

Advertising your property for sale or lease does not have to be expensive or complex.  Simple marketing with effective channels of marketing is all that is required.