There’s no doubt residential home rates are exponential and continue to rise.
But while some businesses struggle with the COVID landscape, especially the retail sector, more commercial premises under $200,000 are hitting the market as some investors are nervous about the future.
According to investment property expert, Anna Porter, we are seeing a lot more retail and office space sitting on the market than industrial or medical, and this is because investors are getting more wary of the local barber shop, or CBD office space after COVID had rolling lockdowns just 12 months ago
She says as now the country is in the grip of an outbreak once again we’re likely to see an increase of cheaper properties hit the market.
“One of our investors was close to transacting on a $3.2Mil multi-tenanted retail investment but as soon as the lockdowns hit they got nervous and pulled out of the deal,” shares Porter.
“We fully supported their decision and encouraged them to do so as retail does come with a certain set of risks, and should only be purchased by more experienced investors that have a big capacity to carry vacancy,”
“Even prior to COVID there was a lot of disruption with online stores emerging and bricks and mortar stores feeling the financial pinch – COVID simply accelerated this phenomenon.”
Porter shares her firm, Suburbanite’s, top pick is industrial and medical assets as they have a very diverse tenant profile and are a relatively COVID resilient option for more sophisticated investors.
The good news is, you can get some great commercial properties sub $200,000 if you know where to look.
She cautions, if you do go for retail you need to understand the risks and do your due diligence around vacancy and competition in the market and how that business will perform in various economic scenarios, but if you want to lower your risk there are a few industrial assets you can find too.
However, when looking at a property such as an industrial warehouse, it is important to be familiarise yourself with robotic process automation as the rise of e-commerce has forced industrial properties to update their automations.
In low commercial vacancy rate regions, there will be a need for multi-story warehousing as supply chains evolve to meet the changing demand of e-commerce.
Mail to parcel rations have reduced from 4:1 in 2015 to 2:1 in 2020. CBRE predicts that by 2025 this ration will be 1:1.
Property 1 – Retail – Perth
BARBER SHOP
Purchase Price: $160,000
Property 2 – Warehouse – Perth
MECHANIC SUPPLIES
Purchase Price: $199,000