SAM COWDY / Commercial Sales & Leasing Consultant
“The foundation of a successful investment is thorough research and expert advice.”
Investing in commercial property can be a lucrative venture, but it requires a deep understanding of various factors to ensure a profitable and smooth operation. From the location of the property to the intricacies of managing your investment, each aspect plays an important role in the success of your investment.
The first step in evaluating a commercial property investment is understanding its location. The area’s current status and future prospects can significantly impact the types of tenants you attract and retain. Consider whether the property is in a well-established or up-and-coming area, the surrounding buildings, zoning, accessibility, and any future plans for the region. These factors will influence your investment’s long-term viability and growth potential.
A thorough inspection by a qualified professional is important to assess the building’s structural integrity, fixtures, fittings, and chattels. To understand the building’s compliance with New Building Standards (NBS), obtain a Detailed Engineering Evaluation (DEE). This information is vital for both legal compliance and informing potential tenants. It’s also important to identify the presence of asbestos, which requires an Asbestos Management Plan under current health and safety regulations. This could affect tenant appeal and involve additional compliance costs.
For properties in regions prone to earthquakes, such as Canterbury or Wellington, verify any earthquake damage and the quality of repairs. Commercial buildings are not covered by EQC, and insurance claims may not be transferable to new owners, making this a critical step in your due diligence.
Understanding the type of property title—freehold or unit title—is essential. Unit titles involve more complexity, including adherence to body corporate rules and potential ongoing costs. Thorough research into the body corporate structure and any ongoing issues is necessary for informed decision-making.
Decide whether you’ll be an owner-occupier, lease out the building, or a combination of both. This decision will influence renovations, compliance requirements, and financial considerations. If you are considering being an owner-occupier, assess if the building meets current and future business needs, including necessary modifications and costs.
If you are looking to lease the building, evaluate the quality of existing tenants, lease terms, rental rates, and outgoings. Understanding these factors is essential for assessing the property’s income potential and growth opportunities. You will also need to consider whether to manage the property yourself or hire a property manager, especially for multi-tenanted properties. This decision affects time, expertise required, and cost implications, including the ability to pass these costs onto tenants.
Investing in commercial property involves navigating a complex landscape of legal, financial, and practical considerations. By paying close attention to these key areas, you can make informed decisions that maximise your investment’s potential while minimising risks. The foundation of a successful investment is thorough research and expert advice. Doing your homework and consulting with commercial property experts can prevent unexpected challenges and ensure a successful investment.
For expert advice and assistance on your commercial property investment journey, get in touch with one of our commercial agents today.
