Your Local Brokers Baseline Finance
Your Local Brokers Baseline Finance
Investing in commercial property offers unique opportunities for significant financial returns, diversification, and wealth creation. Unlike residential property, commercial investments are driven primarily by business fundamentals, tenant strength, and economic conditions - factors that make them attractive but require careful consideration and planning.
Many investors have amassed substantial wealth through property investment and development; however, ongoing success is generally attributed to investing in good assets and realising value over long time periods. This guide is not intended to be a fully exhaustive manual, but rather to provide an overview of some of the more important details regarding Commercial Property Investment.
Throughout this guide, we will only reference partnering with specialists. You would not go to your mechanic for financial advice, and so we do not recommend getting legal advice from your buddy Dave at a BBQ (unless Dave happens to be a lawyer, that is).
Typically, commercial properties deliver higher yields compared to residential investments.
Commercial leases usually span several years, providing stable income.
Investing in commercial property can diversify your portfolio, reducing overall risk.
Strategic improvements and economic growth can significantly enhance property values.
Leases tend to include annual increases to rentals, which over time can translate into substantial income.
In many Commercial leases (“net leases”), the tenant covers operating expenses such as council rates, insurance, and some maintenance. This reduces the owners' running costs and improves net returns.
Commercial investors can access a range of tax deductions, including depreciation, loan interest, and outgoings.
Lenders are often willing to finance a significant portion of a Commercial Property purchase, amplifying returns (and losses).
Owners can undertake renovations, repurposing, improve lease agreements, and a raft of other changes to enhance a property's value.
Commercial property investment involves purchasing properties primarily used for business purposes, such as office buildings, retail stores, warehouses, or industrial facilities. Investors generate returns through rental income and capital appreciation. Or, if the property is owner occupied – saved rental payments.
Commercial Properties are broken down into several different types, each with its own dynamics and drivers. Understanding these definitions is crucial to making informed investment decisions.
Asset Class
Definition
Typical Tenants
Tenant Stability
Recent Performance
Ongoing Desirability
Office Buildings
Buildings for administrative or professional operations
Retail Spaces
Industrial Properties
Warehouses & Logistics
Medical & Healthcare
Hospitality Properties
Special Purpose Properties
Very attractive for yield and long-term lease security
The above categories are broad generalisations of the particular asset class. Each category will have its unique examples of disasters and superstars. The performance of the overall class acts as either the headwind or the tailwind for the performance of the underlying investment.
Category
Commercial Property
Residential Property
Typical Tenants
Businesses (retailers, professionals, manufacturers etc)
Individuals or families
Lease Length
Long-term (1–10+ years)
Tenant Outgoings
Financing
Capital Growth
Market Liquidity
Diversification
Entry Costs
Commonly held in personal names or via Investment Trusts
So, this is all sounding great but let us take a quick look at some of the risks that Commercial Property investors are typically exposed to, as well as the impact this can have on the overall investment.
Commercial properties generally take longer to sell or lease than residential properties. If you need to exit quickly,
you may have to accept a discount.
This applies if you buy property intending to improve or redevelop. Delays, cost overruns, and planning issues can
erode returns. Ask any developer how build costs have changed from 2020 to today.
Banks often require lower LVRs (Loan to value ratio) and more detailed valuation for commercial property. If
market values drop, refinancing or selling may become difficult.
There are hard and fast ways to proceed with an investment purchase of any variety, but the runway outlined below is a common-sense process to follow.
STEP-BY-STEP:
HOW TO INVEST IN COMMERCIAL PROPERTY
Typically, several inputs determine the end value of a commercial property. These are detailed in valuation reports, which are provided by the bank to the client (provided the client has paid for these reports).
Some of the more common methods used to value a commercial property are:
Rental income after outgoings paid by the tenant.
Total rent before deduction of expenses.
Costs associated with operating a property (rates, insurance, maintenance).
Tenant pays all outgoings (insurance, rates, maintenance).
Landlord pays all or most of the outgoings.
The advertised rent before any incentives are applied.
Rent received by the landlord after adjusting for incentives (e.g., rent-free periods).
Concessions offered to attract tenants (e.g., fit-out contributions, rent holidays).
The duration of the lease agreement.
The tenant’s right to extend the lease for additional terms.
The tenant’s obligation to return the property to a certain condition at lease end.
Refers to the financial stability and credibility of a tenant.
Annual net rent divided by the property purchase price.
The expected rate of return used to value income-producing property
Gross income minus all property operating expenses.
Rent that is unpaid beyond the due date.
Council-assigned classification dictating how land/property can be used.
Ownership of individual units within a shared building/facility
Full ownership of land and buildings, without strata or leasehold limitations.
A breakdown of leases, rents, and expiry dates across a property.
Assesses the physical condition of the property
Identifies contamination risks or site limitations.
The percentage of unoccupied commercial space in each market.
Measures the average time left on leases — a key indicator of income stability
The information provided on this site is on the understanding that it is for illustrative and discussion purposes only. Whilst all care and attention is taken in its preparation any party seeking to rely on its content or otherwise should make their own enquiries and research to ensure its relevance to your specific personal and business requirements and circumstances. Terms, conditions, fees and charges may apply. Normal lending criteria apply. Rates subject to change. Approved applicants only.
Copyright 2026. Baseline Finance. All Rights reserved.
