Size does matter
New Zealanders' well-known love affair with property investing is taking a twist. More and more investors who have done well in residential investment during the recent boom are moving into commercial real estate, attracted by higher rental returns and less intensive management.
Wednesday, February 23rd 2005, 4:06AM
by The Landlord
However, there's more to the move than meets the eye. The following pointers have been taken from a new book, the Commercial Real Estate Investor's Guide, by Peter Aranyi.Some attributes to consider are common to all types of commercial property. Others are more important (even essential) for a successful investment in one sector but less significant in others.
Land area
The bigger the better. Size does matter in commercial property. Some investors buy a building for its return or income but ignore the fact that it's sitting on only a small plot of land. Always remember what you're buying is the land, the building is only there for about 20 to 30 years, sometimes less. The size of the land (and what you can do with it) is critical. Buy the biggest piece of land you can get.
Siting (building position)
Where the building sits on the site will have an impact on future extension possibilities, development options and car parking. It's much better if the building is to one side of the section, or in a corner so you can expand or develop adjacent to the existing building.
Market rentals
You must know what the market rentals on commercial buildings are for the various classes in the areas you are considering. This is crucial simply because market rental for an office building may be $100 per square metre, so if you have 10,000 square metres, that's 10,000 multiplied by 100, which is your market rental per year. This is basic to your comparison of different buildings. Crucially, you need to know the market rentals so you can recognise a bargain when you see it.
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