The Pros and Cons of Investing in Commercial Property

When many Australians think about property investment, residential usually comes first to mind. But that’s only half the picture – as commercial property can present a great opportunity to a savvy investor.

03 November 2021

When many Australians think about property investment, residential usually comes first to mind. But that’s only half the picture – as commercial property can present a great opportunity to a savvy investor.

That said, there are considerable differences between commercial and residential property investing. It’s also not without risk.

With that in mind, we’ve broken down some of the key pros and cons of investing in commercial property.

Pros of investing in commercial property


  • Higher rental yields

Commercial property typically gives you stronger cashflow than residential – with rental yields typically averaging between 5% to 10%. In contrast, the average gross yield across the combined capitals for residential properties was 3% in September 2021.

  • Longer leases

Businesses like stability. So they typically sign commercial leases that span three years or more.

  • Lower outgoings

Unlike residential, commercial tenants usually shoulder most of the regular outgoings, including council rates, land tax, body corporate fees, repairs and maintenance.


Cons of investing in commercial property


  • Long vacancies

It can be hard to find the right long-term tenant for a commercial property. So commercial properties tend to have longer vacancy periods between tenancies. And when the property is empty, you have to cover all the bills without the support of rent.

  • Larger deposits

Most lenders view commercial property as riskier than residential, so commercial loans tend to come with a lower loan-to-value ratio than a standard home loan. As a result, you’ll need a bigger deposit and might have to meet more stringent eligibility requirements.

  • More vulnerable to economic shocks

Commercial property is more susceptible to economic shock than residential, as people always need a place to live but don’t always need an office.


Considering investing in commercial property? Get the expert advice you need on how to finance your investment. Contact Vie Financial on 1300 400 843 or fill in this enquiry form.