Blog - Commercial
WANT TO BUY COMMERCIAL OFFICE SPACE TO LEASE OUT? CONSIDER THESE 9 FACTORS…
Demand for commercial office space is booming in Sydney.
If you’re an investor looking to buy to exploit this opportunity, it’s vital to do your research before you commit. It should be purely a business decision. Take any emotion out of it.
Here’s a checklist of the ten most important considerations to help you secure a good tenant and reduce your risk of long-term vacancy.
There’s an old saying that the three most important factors in real estate are location, location and location. And this certainly applies to office space.
They don’t call an area of a city ‘the CBD’ by accident. The acronym means what it stands for. Sydney’s central business district and the city fringe areas tend to be where most of the business action happens. So, naturally, these areas are also where you’re likely to find consistently strong demand for commercial office space over the long-term.
That being said, suburban offices are also increasingly attracting a lot of investor interest due to increasing rental yields and low vacancy rates. These factors also help the capital growth potential of quality premises in suburban locations.
Larger tenants obviously need more office space and they tend to plan their workspaces several years in advance. They’ll often be prepared to sign longer leases to secure the space they need. Securing good quality, long-term tenants will help you to maximise your investment return.
Considering the layout features when evaluating any commercial office space is important. For example, does it have private offices, meeting rooms, open plan areas, as well as lunch room, kitchen and shower facilities? How fast and reliable is the Wi-Fi connection?
If it’s a brand-new office space, is it already cabled for phone and internet access? And is the building ‘smart’?
All these features will be important in attracting tenants. You should also consider how easily the premises could be adapted to suit a specific tenant’s needs if necessary.
To increase tenant appeal, parking at or near a commercial office space should be as convenient as possible for both their staff and their clients. This can obviously be an issue in the CBD, but at the very least, the premises should be as close as possible to public transport.
5. The condition of the premises
Make sure you have any office premises thoroughly inspected by a professional to make sure it’s structurally sound. They should also be able to identify any issues that may not be obvious. The last thing you want is to be liable for any costly repairs that may be necessary.
6. Existing lease arrangements
If the commercial office space you’re considering already has tenants, be sure to have your solicitor look over the existing lease arrangement as part of your due diligence. The seller should be able to provide details of the tenant’s payment history and evidence that they’re financially stable.
7. Ongoing costs
You should evaluate the ongoing costs of owning your commercial office space as part of your investment analysis. For example:
- Council and water rates
- Commercial Real Estate Tax
8. Council zoning regulations
It’s important to understand current (and potential future) local council zoning regulations for a commercial office location. For example, areas that once zoned as commercial may be rezoned as residential (or vice versa).
Zoning laws also define the type of business that can be carried out on the premises and how the space can be used. For instance, zoning laws may prohibit your tenants from installing external signage or changing the internal fit-out of the building. So, do your research.
Finally, if you need to borrow to buy your commercial office space, make sure you get the best finance deal possible. It pays to shop around. Keep in mind that lenders want your business. Be prepared to negotiate your loan terms and conditions with them.
Ready to invest in commercial office space? Talk to the experts
Considering leasing office space instead? Weigh up the pros and cons of buying vs. leasing.