Three Reasons to Understand Different Australian Commercial Property Verticals

• 7 mins read

Looking to build your SMSF, Family Trust, or personal investment portfolio?  

Commercial property is a great option to consider because it provides both yield and capital growth. In order to optimise your investment portfolio, here are three things to understand when you are investing in commercial property.  

1. Different commercial property sectors have varying demands due to broader activity. 

Factors such as economics and environment contribute to commercial property’s supply and demand levels. 

Industrial and Warehousing is in demand, including specialised warehousing with innovative pick and pack technology to streamline operations. This is due to the rise in e-commerce activity across Australia which is one of the most penetrated online retail markets in the world.  

Childcare is in high demand driven by factors such as favourable government subsidies and dual-income families, and it is expected that early learning providers will begin to offer differentiated and premium services to meet this demand.  

The Fuel and Convenience is attracting high demand due to Australia’s rising population. Innovation is a crucial factor with customers seeking better retail experiences and a change in layout with the increased uptake in electric cars. 

2. Different commercial property sectors have different maintenance requirements. 

When investing in your commercial property portfolio, it is important to have a solid understanding of the maintenance requirements of the property you are investing in.  

For example, a retail chain will need more attention to aesthetics versus an industrial property.  Retail maintenance focuses heavily on areas subjected to high foot traffic and customer interaction. Frequent cleaning and upkeep of flooring can help withstand the wear and tear, along with regular window and facade maintenance to maintain an attractive storefront.  

Industrial properties may have distinct maintenance needs due to the presence of heavy machinery and specialised equipment. Safety systems, including fire suppression systems, emergency exits, and alarm systems, must be regularly maintained to ensure the safety of workers and compliance with regulations. 

An experienced property management team can determine the maintenance requirements and how works are undertaken to understand the schedule and costs for maintaining your property.  

3. Different commercial property sectors have different tenancy arrangements reflecting the unique needs and dynamics of each sector.

Commercial property leasing requirements vary across each vertical. Some examples include: 

Single-Tenant Lease: A single retailer leases an entire retail space. This could be a standalone building or a unit within a shopping center. 

Multi-Tenant Lease: Retail properties often have multiple tenants leasing individual units within a larger retail complex or shopping center. Each tenant operates its own storefront, and common areas like parking lots and walkways are shared among all tenants. 

Lease with Management Agreement: An operator operates the premises on behalf of the property owner. For example: hotel management; childcare. 

Furthermore, it is crucial to understand the way tenants are managed in the commercial property you are investing in – a happy tenant makes for a happy lease. Running repairs need to be managed by professionals and undertaken in a timely manner, and you need to understand what the requirements of the tenant are and how these are communicated.  

At TPA, we have been successfully acquiring and managing commercial property since 1993. Our advisors have a passion for property and would welcome the opportunity to talk with you about your investment portfolio needs.  

Contact our team  to start the conversation about commercial property investment.