More investors looking at smaller commercial properties as interest rates fall and they chase rental income stream

As interest rates plummet, commercial property continues to provide attractive returns for investors looking for long term rental income at prices that won't break the bank.

Among the commercial property sales recently announced by Bayleys Real Estate was a light industrial unit in the Christchurch suburb of Wigram (see photos above and below).

The modern unit had a showroom and office at the front and high stud warehouse/factory with roller door access at the rear, a total floor area of 276 square metres and five car parks.

It came with a long-standing tenant who had recently extended the lease for another five years, with annual rent set at $41,000, to be reviewed in three years time.

Bayleys agent Benji Andrews who handled the sale of the property with his colleague Ben Carson, said although most of the potential buyers who showed interest in the property were experienced investors with existing commercial property portfolios, there were also a number of novice investors looking to try their hand at commercial property for the first time.

Most were looking for a long term rental income stream and when it was put up for auction it was sold under the hammer to an experienced investor who bought it for $630,000.

With rental income of $41,000 a year, that gave the new owner a net rental yield of 6.5%.

Commercial properties differ from residential properties in that under most commercial leases the tenant usually pays outgoings such as rates and insurance, giving the investor a net yield, whereas with residential property the landlord usually pays the outgoings, so the yield is gross.

So in the current low-interest rate environment a net yield of 6.5% will look very attractive to many investors seeking a long term income stream.

You can check out the prices paid for many types of commercial properties located throughout the country on our Commercial Property Sales page.

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