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Abu Dhabi and Dubai have recently witnessed the growth of new destinations for commercial properties. These include areas such as Sowwah Square in the capital and Business Bay in Dubai which are expected to provide healthy returns on investment.
Here are some of the advantages of being an owner of a commercial property.
Better returns: Returns on commercial properties are significantly higher than on residential properties. According to estimates, rental yields of a commercial property range from five to eight per cent in Dubai. A recent study by Colliers International has revealed that the average rental yield of a residential property in Abu Dhabi is around eight per cent while rental yield of a commercial property is at nine per cent. Rents of residential properties are often limited by emotional pricing while there is more objective pricing for commercial ones based on location and facilities.
Better upkeep: Tenants of commercial properties take a more proactive role in the maintenance and upkeep of the office space. This is because the office space is an extension of the profile of the company and all its business activities take place around the office premise including meeting prospective clients.
Limited hours of operation: Most tenants of commercial premises operate during daytime. Therefore, landlords are unlikely to answer frantic calls for leaked pipes and clogged washrooms at odd hours.
Leasing commercial properties involves paperwork that spells out different types of contracts between the tenants and landlords. In gross lease arrangement, tenants have to pay a fixed amount as rent, whereas the landlord pays other charges like property maintenance, tax and insurance charges.
In triple net lease formats, the bonus of paying asset-related expenses is on the tenant but with a generally lower rent of the property.
• Commercial properties can generally provide better rental yield
• Tenants or lessees take better care of commercial properties
• Payment of asset related charges must be spelt out in con
Source: S. Dhar, Special to Properties
The writer is a freelancer