OFFICES
Investing In Office Space
5 reasons why it’s a good investment bet
BY MIKE WALTERS
M
any financial gurus will tell you
property is a good way to diversify an
income portfolio and will be one of the
foundations of any income-generating portfolio. But
why is commercial property - specifically office space
- a good investment bet? Here are five reasons why I
believe investing in office space in this market makes
sound investment sense.
1. Investment stability
Markets around the world have been doing all
sorts of dips, dives and surges in recent years,
with the stock market being particularly volatile.
Investors these days are looking for tangible
assets that are less volatile than the stock
market, but which also provide yield and capital
appreciation. Achieving stability is possible
through investment in commercial real estate,
particularly as it is a long-term investment
option.
2. Smart time to buy
Interest rates are bound to go up over the
next 12 months, but they are still at relatively
low levels. Added to this, pricing in the office
space market still offers investors good value
for money. Small to medium business owners
are gravitating towards owning their own office
space – a clear precursor to the market turning,
however, a number of external variables can
delay or accelerate the upturn.
3. Rental income and capital returns
Aside from diversifying a real estate portfolio,
office space investment is a good way to earn
high rental income as well as solid capital
appreciation. Commercial properties tend to
generate more rental income compared to
residential properties – roughly 8%-13% yield
compared to a 5%-7% yield from residential
investments. While commercial properties
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Commercial Handbook 2016
require larger investment amounts than
residential properties, they are often said to be a
more prudent real estate investment if the buyer
has the necessary equity available.
4. Leases and tenants
Leases in the commercial space are generally
longer than residential ones, typically spanning
three to five year periods. It is not inconceivable
that a commercial tenant can be in place for
10 years, which will be the same period as the
commercial bond term. In commercial property,
there is also a higher chance of lease renewals
than with residential properties, which usually
have higher tenant turnover rates. Commercial
tenants tend to take better care of the property
when it comes to reporting problems and general
maintenance etc, as it houses t