5 Reasons To Invest in Commercial Property
Owing to its less-expensive and low-risk nature, most investors consider buying residential real estate to be the best property investment in Pakistan. Whereas there is nothing wrong with this notion, the reality remains that investing in commercial property can be far more remunerative because it will generate higher capital gains. Additionally, commercial investment in Pakistan can be a great way to diversify your portfolio and build professional relationships.
Office buildings, shops, shopping malls, warehouses, industrial buildings and mixed-use developments that include apartments and shops are among the most common commercial properties in Pakistan. Compared to residential real estate, purchasing commercial property might need a heavier up-front investment. Still, it will also provide a higher and relatively stable rental income for years to come.
Buying commercial property for investment requires a lot of patience. Everything from risk assessment to documentation and construction or renovations to finding the right tenants will take a very long time—however, the longer leases and considerably higher rental yield more than makeup for it.
Just like any other type of investment, buying commercial real estate entails adequate preparation and due diligence. There are many factors one has to consider if they want their investment for their achievement.
Let’s take a look at each of these factors in detail.
SELECTING AN IDEAL LOCATION
Location is the most crucial factor for commercial investment in Pakistan as it determines the value of your property.
Ideally, a commercial building should be placed in a region that receives a considerable quantity of conveyance and pedestrian traffic. To get a better income, it’s suggested to speculate in properties placed in well-developed localities with good infrastructure. This can help attract high-end businesses, like international brands and massive banks, to be your tenants.
Furthermore, patrons should be ready to see your building comparatively early from the road rather than having to search for it. For long-term returns, you must narrow down on commercial properties in fast-appreciating areas. Access to public transportation and proximity to major landmarks should also be considered while searching for commercial property available for sale in Pakistan.
Apart from the location, the neighborhood demographics can also impact the success of your commercial property investment. It might facilitate if you have observed the area demographics to work out whether or not your property would be a good fit for the neighborhood. For instance, investing in a retail building might not generate enough revenue in a comparatively low-income neighborhood. Similarly, an area with very little to no public transportation access may not be appropriate for an office building.
On a side note, those who live in Lahore can check out our detailed guide on the commercial areas in DHA Lahore for more investment options.
STUDYING MARKET TRENDS
Studying the trends of commercial property in Pakistan is another factor that can lead to a successful venture.
A smart investor always has adequate information about the legal implications, zoning restrictions, competition, vacancies, rental price and risks related to buying a property in a particular area.
It would help if you also verified the property demand in an area before investing. For example, investing in a very retail building in a very outstanding commercial property with significant competitors can only make sense if there is a requirement for another similar venture. This goes for industrial buildings, workplace buildings, and warehouses.
Moreover, it Is necessary to understand the dynamics of various property types. If you intend to invest in a position in a small shopping plaza, you must consider both the short and long-run impacts of e-commerce platforms on the consumer market. Likewise, co-working spaces growing trends also can affect the demand for workplace area as small startups may prefer a less expensive, no-strings-attached arrangement.
CHOOSING THE RIGHT TENANTS
Always find the right tenants for your commercial property is a significant factor that ensures a good and steady rental income. In case you are going to buy a building that is already occupied by many businesses, it is imperative to analyze every tenant’s financial stability to make sure they will meet the rent deadlines. You can also study their business model for a clearer image. To place it, it’s ideal to have successful businesses as your tenants as are less likely to default on the rent and guarantee a continuous flow of financial gain. Since well-established companies have a lot of intensive customer base, they are also less likely to pack up and move to a new location.
UNDERSTANDING THE RISK OF COMMERCIAL PROPERTY
When it comes to the commercial vs. residential investment debate, the latter is generally considered a low-risk option due to its consistent market demand. In contrast, the former is regarded as a high-risk option as it is more costly.
The risk in commercial property investment varies with the type of property. Compared to residential property, wherever two adjacent homes or plots could show similar risk, the stakes in investing in commercial property in Pakistan will be considerably different for properties located within the same area. Since no two commercial properties are alike, the risks related to them will fluctuate without any correlation between them.
Therefore, it is important to understand the risks associated with your potential investment before buying commercial real estate in Pakistan. This includes assessing the property condition and selecting the right tenants.
Although it is going to sound complicated, the first step to assessing the property condition is to require a comfortable tour of the building you are about to purchase. Take a glance at the properties structure and interior amenities to determine which features need to be updated or removed. Once you’re happy, there are no structural damages or major renovations required; you’ll move to the second step and review the property documents. These may include zoning documents, property insurance, environmental assessments and more.
FACILITIES AND AMENITIES OF COMMERCIAL PLOTS
Lastly (and perhaps most importantly), the facilities and amenities of commercial development have a significant impact on its marketability and rental yield. Even if you plan to invest in commercial real estate with little money, you shouldn’t compromise on basic amenities such as water, gas and electricity supply. Cleanliness and maintenance are also important for commercial property.
Some of the most popular facilities and amenities available in commercial buildings include covered parking areas with designated spots for each tenant, well-maintained lobby and reception desk, high-speed elevators, a safe and secure environment, CCTV surveillance, fire safety system, emergency exits and backup power generators. An impressive façade and well-designed interiors also add to the charm and uniqueness, as such factors are bound to attract more high-end tenants. In comparison, properties with no designated parking spots or low maintenance may not draw big businesses’ attention.
This brings an end to our guide detailing the factors behind successful commercial investment in Pakistan. Feel free to share your feedback and comments with us at email@example.com
Meanwhile, you can look at our tips to increase the energy efficiency of a commercial building and learn more about the advantages of living close to a commercial area.
Also Follow These Rules for Smart Investment.