The best time to consider investing in commercial property

Australians love bricks and mortar - but there are times when a commercial property can make more sense than residential housing. We look at five reasons why it could be time to consider commercial property.

1. You're priced out of the residential market

It's no secret that prices have soared in recent years. The national average home price in now more than $1 million, according to the Australian Bureau of Statistics, with New South Wales ($1.24 million) and Queensland ($944,000) the most states in the country.

If those residential property prices are beyond your means as an investor, a commercial property may be a more affordable prospect.

A quick hunt around shows that it's possible to pick up office space, retail space and even small industrial warehouses for less than $500,000.

2. You're chasing high yields

One of the benefits of commercial property is that leases tend to run for much longer than residential property - usually 3-5 years. This provides greater certainty of income, with the sweetener that yields tend to be higher.

As a guide, the latest Raine & Horne Commercial Insights report shows that yields are currently sitting around 5-7% depending on the type of property - office, industrial or retail - and the location.

By comparison, gross (before costs) yields on residential property reached 3.74% at a national level in the first quarter of 2025, Cotality research shows. Yields were 3.5% for houses and 4.6% for apartments.

3. You own a small business

Investing in your own business premises offers security of tenure plus a chance to control leasing costs.

Chris Nicholl, chief executive of Raine & Horne, says that there has certainly been a healthy amount of demand from owners looking to buy their own premises when it comes to industrial properties, like warehouses, in recent years.

"Warehouses, in particular, are highly sought after by both investors and occupiers due to their critical role in supporting strong logistics and distribution networks."

He also notes that there has been growing interest in the office market from owner-occupiers as conditions have improved post-pandemic.

"Broadly speaking, we are seeing investors and occupiers focus on quality properties - assets that don't just have strong nearby transport links, but which also tick the boxes for energy efficiency and an abundance of amenities that make office spaces more engaging places to work."

4. You're looking for a source of regular income

You may choose to invest in commercial property indirectly through a listed property trust or an unlisted fund. Both have a track record for paying regular income as well as a chance to access a cross-section of commercial properties.

Many A-REITs and unlisted funds pay distributions monthly or quarterly underpinned by regular rent receipts. This can be a far more regular source of income than, say shares, which only pay dividends twice a year.

5. You don't want the ongoing costs of residential property

In a residential tenancy the landlord wears many of the ongoing costs including repairs and maintenance. Not only can it be a hassle managing these expenses, it also lowers net (after costs) yields.

By contrast, in the commercial market, it is more common for the tenant to pay many of the property's regular expenses. That means more of the rent goes straight to the landlord, with less of a drain on cash flow to keep the place in good shape.

Bear in mind, commercial property is regarded as a higher-risk investment than residential housing. Leases may be longer, but vacancy periods can also be more protracted. So it's important to weigh up the pros and cons to make the choice that's right for you.

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