The landscape for commercial leasing is changing due to the economic uncertainty brought about by the pandemic and accelerated digital transformation of the business sector. While commercial property landlords are enjoying returns of up to 12%, it makes sense there would be more risks and work involved. These changes have impacted leasing rates, with vacancy rates for prime offices in capital cities currently still high compared to pre-pandemic, ranging from 8.2% (Melbourne) to 13.6% (Perth).  As for retail property, vacancy rates rose from 3.7% in 2019 to 12.9% by early July, according to commercial real estate advisory CBRE.

When looking for a property, it is also important to take location into consideration.  While a commercial property might look good today, local government zoning changes from commercial to residential, for example, could throw a spanner in the works. Check for infrastructure projects, such as railway lines, shopping centres and freeways.

As a commercial landlord, you may need to expend thousands of dollars for fit outs to get properties up to an acceptable rental standard, or meet council regulations for their intended purposes, say as a child care or medical centre. As a retail landlord, these expenses may include, but not be limited to, rates, land taxes, strata titles levies, insurance, cleaning, security and maintenance.

As a crucial element of your risk mitigation strategy, commercial insurance comes into play when there is damage to your physical property, such as due to weather, fire, or theft, rather than an economic downturn. As the landlord, you’ll be protecting the premises itself, not the fixtures or fit out. Typically, commercial landlords insurance covers:

• The commercial property – repairs, replacing the property if damaged by flood, fire, storms, or the tenant
• Loss of rent if a tenant has moved on or while repairs are underway
• Theft of your fixtures, fittings or furnishings on the premises
• Legal liability if a third party is injured or their property is damaged

If you would like to know more about how we can guide you in protecting your risks for your commercial property, please CLICK HERE to read more, or feel free to contact us.