Residential property investment has been the primary focus for most property investors in New Zealand as it is an easily understood form of investment, carries with it less risk of vacancies and can be more readily saleable in a depressed market.
For these reasons commercial property investment has been largely overlooked by many investors; even though this class of property can provide you with much greater levels of return than that from a purely residential investment. An immediate benefit to the owner is that commercial tenants pay for outgoings on the building such as insurance, rates, building Warrant of Fitness fees, repairs and maintenance and often management fees.
As a property investor, if you are looking to diversify your residential investments, then commercial property would be the next logical step. However, it is true that residential investors are often wary of entering the commercial property market due in part to their lack of understanding on the driving factors behind commercial investment and perceived risk in re-letting a property should it become vacant.
Vacant commercial properties have certainly suffered more than residential in the past when it comes to finding a tenant and prolonged vacancies can occur. Furthermore, getting a new tenant signed up can be expensive. Agents fees of 13% to 15% of the first years rent, and inducements such as a rent holiday and/or help with fitout costs are often expected. » Read more: Residential Or Commercial Property Investment