They say the best way to prepare for tomorrow is by investing today. In our current market, there are a number of investment vehicles and one of the top return-generating options is real estate. Then again, real estate can come in different classes as well; for instance, land, apartments, condominiums, and commercial properties. There are numerous debates on which of these real estates would generate the most gain. Here, a common investment dilemma is apartments vs land, leaving the competition in commercial properties relatively low. But if you decide to be bold and invest in commercial property, these can be your benefits.
Steady Cash-flow Over Time
Once you get hold of a commercial property, you can either choose to rent it or lease. But in most cases, commercial tenants go for lease contracts as it provides long-term mutual benefits for them and landlords. Even if some companies rent the space, the contract is usually at least for a year or even longer. Therefore, in both of the contract options, you will receive steady cash flows for a fixed period of time. Since tenants are corporate clients, there is a low chance to default on the payments. On top of that, commercial properties in Gulshan, among other office hubs in Dhaka, receive a premium on the payments. So, if you can invest in the perfect commercial hub of Dhaka, your returns will be much higher.
For a given portfolio of assets, if you don’t go out of the conventional investment approaches, you can only generate a certain amount of return. It is usually hard to increase the interest amount but you can reduce the unsystematic risks by diversifying the portfolio for the same return. Meaning, if you invest in commercial property along with other assets, chances of incurring loss become relatively low.
As a real estate investor, you can diversify a portfolio by including commercial assets. Because commercial and residential properties cater to different consumers, they possess unique market characteristics. For example, the commercial segment of real estate in Bangladesh is more inelastic to inflation and high loan interest, and shows a more consistent consumption pattern than the residential segment. Hence, having such properties in your investment portfolio will safeguard you from future market volatility.
High Price Appreciation
Undoubtedly, the price appreciation of a commercial property is much faster than an apartment as they cater to different market segments and target groups. This makes demand and supply move independently in these two markets. Secondly, the growth of businesses and the economy will directly impact the commercial property market. On the other hand individual disposable income, purchase parity, and personal requirements drive the residential estate segment the most. Additionally, tenant concentration in a commercial hub is clearly higher than in a residential area since it works as an advantage for businesses to stay in close proximity to others. For these reasons, the price of a commercial space increases faster than an apartment’s. That is how you end up having a better value for if you invest in commercial property.
One of the perks of investing in a commercial property is that you will not have to worry about the maintenance of your estate. Usually, both residential and commercial tenants pay a certain maintenance fee with their rent or lease payment. But, in our country, the implication of the rules are not the same for these properties. Residential tenants tend to be more reluctant about such rules set by the management committee.
On the other hand, commercial space renters are usually businesses and they have a reputation to maintain. Hence, they tend to prefer sticking to a set of rules and cooperate with the committee for the proper maintenance of the commercial space. Even though cost might differ among these property types and you might need additional manpower for your commercial estates, you will still earn a higher return if you invest in commercial property.
Professional Relationship With Tenants
Corporate tenants will maintain a professional relationship with you the entire time. Meaning, every transaction, and contract will have paper records, giving both parties a better chance to take legal action in case of any misconduct. Moreover, the frequency to switch spaces is relatively low for commercial tenants, resulting less hassle for landlords. Plus, office spaces in a good location hardly stay vacant. As rental contracts have expiry dates, it gives you a window to pre-plan and find new tenants to maintain a steady income. Usually, a new interested company submits their proposal before the previous tenants have a chance to move out. Since all parties maintain a professional relationship while dealing with commercial properties, everyone can stay on good terms with one another.
So are you planning to invest in commercial property in Dhaka? Share your queries and concerns with us in the comments section below.