The Most Lucrative Commercial Property Types For Investors
Category Commerical Property News
Investment decisions can be fraught with trepidation. You've worked hard for your money, and now you want your money to work hard for you through the right investments. But, what is considered to be the correct way to go when it comes to investing your money? While many financial gurus will wax lyrical on the benefits of investment accounts and buying shares, this is just one piece of an efficient financial portfolio. If you want to diversify, property - specifically commercial property - is still a sound financial move to make.
Why Invest In Commercial Property In South Africa?
While a flat in city centres like sought-after Greenpoint in Cape Town remains a fantastic investment, going commercial comes with a host of benefits.
Firstly, your earning potential is significantly higher with commercial real estate compared with residential. "The Capex rate in South Africa is currently +11% for commercial properties, versus 5-8% for residential properties," tells Ooba Home Loans.
Secondly, you can rely more on rental income from an office space or factory than from a flat or house. This is because rental commercial leases typically have longer terms than residential leases which result in way more stability.
Lastly, the potential for appreciation is high if you buy in a developing area. This is why location is absolutely key! Commercial properties in growing areas benefit from economic development, infrastructure improvements, and demographic trends.
If you're considering branching out into commercial property for your next investment, here are some of the most lucrative options to consider:
Office Buildings And Co-Working Spaces
The office sector is not dead! Many companies around the country have called employees back to physical office spaces if not full-time, then on a part-time basis. Major cities in the country (Johannesburg, Cape Town, and Durban) have vibrant office markets that are attractive to many companies.
One of the driving forces behind people returning to the office if they do have flexibility is load shedding. Many people are at the mercy of frequent power outages making uninterrupted work from home almost impossible. So, employees are returning to offices where generators, solar panels, and other means of power are more available.
Load shedding and the increase of remote workers have also seen the rise of co-working spaces popping up around the country. A co-working space is a shared office environment where different businesses and freelancers can share amenities. Businesses can benefit from lower rentals than a traditional office as they only book for the hours and space they're using, and sole proprietors and freelancers are also able to book space when load shedding hits or they're in need of some human interaction. In terms of ROI, "Due to the flexibility and affordability associated with the services provided by coworking space companies, this market is expect[ed] to annually increase its value by about two billion U.S. dollars between 2022 and 2030. In this manner, potential investors, as well as clients and future entrepreneurs could expect being part of a market with a forecasted value of 24 billion U.S. dollars in 2030," tells Statista.
Warehouses, Specifically Distribution Centres
The logistics and manufacturing sectors in the country continue to grow, leading to increased demand for industrial properties. Warehouses, industrial parks, and - more specifically - distribution centres can provide attractive returns. However, the key when it comes to this type of investment is location near major transportation routes for ease of goods transportation.
The online shopping boom didn't leave our lives when the lockdown ceased. With more and more retail businesses offering online shopping alternatives, distribution centres are in demand - and this is particularly relevant in South Africa, "One country where this trend is particularly evident is South Africa, where there is a steady demand for new, modern, and efficient distribution centres. This has resulted in the outperformance of all other asset classes, delivering an overall income return of approximately 9.2% and capital growth of 0.8% in 2022," says Knight Frank.
Self-Storage Units
Storage units are simple. All you need is some space and some garages, and the facility doesn't even need to be located in a hub! The simplicity of setup and cheaper, out-of-the-way real estate options make self-storage units a no-brainer when it comes to commercial property investment.
Add in limited operations and maintenance costs, and this is low-fuss rental at its finest.
Nursing Homes And Health Care Facilities
A relatively new phenomenon that is impacting developed nations and is beginning to show face in South Africa is an aging population. According to Statistics South Africa, "In 2022 the estimated population of South Africa included more than five million people aged 60 or older. This represents a 9,2 percent share of the overall South African population."
As the number of elderly steadily increases, healthcare facilities and nursing homes will become more and more in demand.
Of course, this route can be more complicated than other commercial property options, as these facilities are subject to specific regulations and licensing requirements.
It's important to note that investing in commercial properties comes with a few hoops to jump through, including upfront costs, stricter zoning and regulatory requirements, and sometimes longer periods to find suitable tenants. This is why having a partner in this journey is vital. OfficePlace specialises in commercial property throughout Johannesburg, Pretoria, and Cape Town and can help you make the best investment decision possible. View the range of commercial properties we have available here.
Author: OfficePlace