Is it time to invest in your company’s own premises? Or are you looking to boost your wealth with a property acquisition? In both instances, you should consider reading this first.
In 2001, Barbara Corcoran sold her New York-based real estate investment company for approximately USD70 million. Today, she’s gained prominence in the Big Apple and around the world – and has written numerous books on the benefits of investing in real estate from both a business and personal wealth perspective.
“There were two things that happened that for me that were like a big light in my head. One was when I accidentally sold an apartment rather than renting it. I was just planning to rent the apartment when the young engineer said that he wanted to buy, that’s what got me in the property business,” she says. The other thing that happened to Corcoran was when, in one year, she racked up USD80 000 in profit from selling and investing in property.
Related: How to start small and succeed in commercial real estate
American Shark Tank star, entrepreneur and property mogul, Barbara Corcoran believes investing in property to be one of the best ways to make money. She’s backed up on the local front by commercial property specialists, Knight Frank. The firm reports that the commercial and industrial property sector is good for solid returns in uncertain times.
Why invest in commercial property in South Africa?
According to Grant Lewington, business development executive at Improvon, most commercial and industrial property in South Africa is largely held in Johannesburg Stock Exchange (JSE) listed funds – with a small element of the sector held in private capacities. This makes the space more reliable from an investment perspective according to the property professional.
“The majority of investment into JSE listed properties is in the retail and commercial property space. But, the economic climate makes industrial property the most attractive option,” he says. “Industrial property is seen as a good choice because it promises steady growth over time.”
“SA’s economy needs factories and warehouses and these properties are less complicated and more cost effective to develop. Generally, industrial property owners work with only one tenant per building too. This reduces the risks associated with the investment. Of course, with the lower risk is a slightly lower reward, as is the case with any investment, but the reduction in risk is well worth it,” Lewington explains.
How to pick the right commercial property to invest in
Industrial and commercial spaces are proving popular amongst investors, but there are numerous types of mixed-use buildings and locations to consider investing in. Chances are, when you’re out there looking for a property for your business or as an investment vehicle, you’ll come across a number of places that look attractive at face-value. It’s advised to keep the following points in mind to ensure you pick the right commercial property to invest in:
- Don’t take just one agent’s valuation to be the gold standard. It’s advised to remain cautious around property valuations and to ask a number of reputable agents for a professional valuation or opinion on a potential investment. Banks can also assist you in researching property value.
- Consider what it will cost to adequately insure and protect your new property. Is the building, the land, or the site safe and secure from a location perspective? And, can you control your liabilities where possible by fixing things like the interest rate on your bond, for instance?
- Are you comfortable waiting? Industry experts say commercial real estate is a long-term investment where the power of compound growth can really come into play. It’s advised to ‘never sell’, but to slowly increase the number of your passive investments in property if and when you can.
Related: How to be a smart (and sensible) commercial property investor
Solutions for South African commercial property buyers and investors
Standard Bank can help you find the right commercial property, and finance and insure it. Our team of commercial property experts can help you with:
Expert communication and sector support
Talk to our property specialists about the right property and financing for you.
Clear insights on the market, challenges, and opportunities
Know the opportunities in your area with access to our market trends analysis.
Flexible terms for repayment of loans and bonds
Let us structure your capital repayments around your cash flow needs.
Affordable commercial property finance packages
Grow a successful property portfolio with investments that suit your budget.
We look at commercial property finance from two perspectives:
- Investor property financing
- Owner-occupied property financing.
In both instances, we can provide you with a market trends analysis to ensure any investment you make is in line current and future needs. Investor property finance is ideal for individuals that are looking to grow their wealth through investment in retail premises, factories, warehouses, offices and industrial plants. Owner-occupied property financing is ideal for entrepreneurs that want to ground their operations and establish a solid location from which to grow in the future.
- Investment in commercial property remains a lucrative way to grow business and personal wealth.
- Particular types of commercial properties offer greater rewards, while others bring greater challenges.
- Speaking to a commercial property specialist can help you determine the best path to invest in commercial real estate.