Choosing to invest in commercial property

Commercial PropertyImage Credit: Supplied

For your next investment, instead of buying a residential property, why not invest in a commercial property with huge potential rental income?

The prices of properties in premium areas in the UAE are going positive. The prospects for rental growth, in Dubai for example, are starting to accelerate. As a beginner, you may directly invest in a fund which holds actual physical properties, or buy properties yourself and rent them out to other businesses on fixed contracts. Below shows the different types of commercial options available in the UAE:

• Apartment building – This could range from a small building of five or more units to a multi-story apartment tower. It is easy to rent out, and is a positive income-flow generator. Banks are more willing to lend money for this type of investment.

• Office – This type of property is not easily bought or sold and can be very exposed to market fluctuations. The good thing is that the benefit of a regular rental income happens once it is leased for five to 20 years. Typical triple net (NNN) lease rates increase every couple of years.

• Warehouse – Just like office buildings, the property is locked into a five or 10-year lease agreement. During this period, this will provide investors with a great opportunity for return as lessees commit to making payments for the entire lease period even if they do not use the property.

• Retail space – This property is also leased out on a long-term NNN lease basis and gives a solid chance of getting a return on your investment. Experts recommend this type of investment as rents increase over time as the market keeps getting better.

• Car parking – It is a new commercial property opportunity usually available in busier districts with a string of residential tenants and a higher scale of popularity. Experts say this can give a return of an average of 9 to 10 per cent of earnings per year.

Handy Hints
• Commercial properties basically give more financial rewards
• The earning potential is annual return off the purchase price
• Yield is often higher per square metre in commercial properties

See related story: A guide to investing on alternative assets in the UAE

Source: Cleofi-Krista Capili, Special to Properties
The writer is a freelancer


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