Before answering this question, it might be helpful to define each term first.
Both the retail and industrial sectors are considered ‘commercial real estate’ (as opposed to ‘residential real estate’). Commercial real estate refers to buildings or land intended to generate profits; industrial and retail are simply subcategories of commercial real estate.
First of all, an industrial property is defined as a property used for the actual manufacture of something, and can be considered a factory or a plant. This is generally zoned for light, medium, or heavy industry. This includes things like warehouses, garages, and distribution centers, etc.
Retail property is commercially zoned property used solely for business purposes, the actual sale of the product, rather than its manufacture: retail stores, malls, malls, and stores, all grouped together nicely under the retail umbrella.
In general, companies that occupy commercial real estate often lease the space. An investor typically owns the building and collects rent from each business that operates there.
There are four main types of commercial real estate leases, each requiring different levels of responsibility on the part of the owner and the tenant.
Single net lease – tenant is responsible for paying rent and property taxes.
Double net lease – tenant is responsible for paying rent, property taxes, and insurance.
Triple net lease – tenant is responsible for paying rent, property taxes, insurance, and maintenance.
Gross lease – tenant is responsible for rent only; Landlord pays property taxes, insurance, and maintenance.
If you find yourself considering commercial property ownership, there are a few things you would do well to keep in mind:
1) Attractive Appearance – The last thing you need is a vacant commercial property in Sydney for an extended period of time. Think about how potential tenants think: what their customers want to see?
2) Aesthetic entrance: first impressions count, simple, simple things. This is a great tool to put your prospects in a great mood…and your customers.
3) Natural light: today it is in especially high demand
4) Location: close to other offices, public services, transportation, etc.
Since 1980, commercial property has had an average return of 9%, although today it is around 6%. Industrial real estate tends to be the most volatile and is currently returning around 7% (compared to its peak of around 12% during the 1990 recession).
And obviously, no matter what form of commercial property you’re considering, read the lease carefully. It sounds silly, but you’d be very surprised to see problems that can turn into problems simply because things weren’t read correctly.
