Uncover your next commercial/industrial real estate investment
Category Advice
Investing in commercial or industrial real estate can bring in good returns if done right. There are a number of property options available in these sectors, including office, retail, factory, warehouse and showhouse spaces, each with the potential to create long-term wealth.
Advantageously, investing in the South African market means that most commercial and industrial properties are held in Johannesburg Stock Exchange-listed funds, with only a small percentage held in private hands. Being listed on the JSE enables you to easily sell shares to expand your investment and increase its value.
So how do you navigate this investment market? Consider the following three steps:
1. Find your Ideal Location
Regardless of the sector, location is always an important consideration in real estate. When it comes to commercial and industrial properties, a good location will be one that has well-maintained infrastructure; easy access to freeways and highways; a close proximity to transport hubs and airport/s; and a strong property market with a track record of generating healthy returns. Such a location will ensure that your investment attracts the right tenants and retains them over a lengthy period of time.
The location you choose will also determine the quality of properties and the rental rates you can charge. For example, in Sandton and Midrand, there is a huge demand for A and AAA grade commercial buildings. Here, rental prices are some of the highest in the country with many developments showing higher returns than other nodes around Gauteng and the wider South Africa. Rentals can start from R13 400pm for a 268sqm office space and climb up to R454 000pm for a 2000sqm space.
Industrial properties, on the other hand, are showing steady long-term growth in the areas of Alberton, Boksburg, Edenvale, Kempton Park, Germiston and Roodepoort. The rental prices of properties here can range from R15 000pm for a 570sqm factory to R820 000pm for a 12 615sqm warehouse.
2. Ask the Right Questions
There are essential questions to ask before you purchase an investment property that will help provide clarity on whether or not it is a smart decision.
Firstly, it is integral to research the tenant activity by asking the seller the following questions:
1. What were the vacancy rates when you were letting out the property?
2. Who are the current tenants and what are they paying?
3. Are tenants planning to renew leases or is there a high tenant turnover rate?
Secondly, you will need to find out about the property's financial history and zoning information. To do this, request to see the sellers’ cash flow statement and confirm whether or not the site is properly zoned.
Lastly, it is then recommended to talk to store-front managers from businesses in the area. Ask them about the pros and cons of operating here and the recent/current projects undertaken such as infrastructural upgrades, new developments or renovations to existing properties. Overall, this will provide valuable insight into the daily functioning of the businesses, the standard of service of delivery and whether or not the market is expanding and improving.
3. Get Experts to Help
Investing in commercial or industrial property is a big decision that comes with a substantial price tag and various procedures. Considering this, you will need a team of experts to guide you through this process. This team includes;
Surveyor: Unless you are a cash buyer, you will need a survey conducted as part of your loan application. A surveyor will advise you on the current market conditions, estimate the value of the premises and investment value, and assess the condition of the property.
Lawyer: A lawyer will advise you on the details in your contract, and if needed, they can arrange for the exchange of contracts and the completion of the transaction. They can also negotiate the terms of your loan arrangement.
Accountant: An accountant will help you with tax issues and determine your budget when applying for a loan through a bank. They will use their expertise to help you get the loan amount you require by writing-up professional financial statements and providing evidence that the investment will generate profits.
Real Estate Agent: A specialised real estate agent in the field of commercial and industrial property is a valuable asset throughout the entire process. They ultimately represent you and will assist with the purchase of the property including negotiating towards a good purchase price.
To find out more about investing in commercial or industrial property in Gauteng, our qualified agents from 3CUBE Property Solutions are ready to help.
Author: 3CUBE Property Solutions
