Before making any investment, one should do some research and it becomes more vital to do so, when it comes to investing in office buildings. Commercial property investment needs a thorough research and understanding. When purchasing commercial real estate there are certain pros and cons one needs to weigh in. We have listed down these points so you can be assured before making an office property investment.
- Return on investment: The biggest factor when buying office space for investment is what the return will be. One of the biggest advantages of investing in office space is the rental yield which is much higher than that of residential investment. Commercial real estate is known to have a return of 6-8% in terms of rental versus 1-3% in the residential market.
While on the con side the residential market is known to have a better return when it comes to resale value. To get a better return in long term sale, one should focus on buying in the early stages of construction.
- Known builder – A big investment strategy is to purchase from a known builder, this reduces the stress regarding the quality of construction, timely delivery of projects and property sanctions. Also, the post construction maintenance is a major aspect to review.
- Project location: Choosing the right location with good connectivity is a key to guaranteeing a good return on your investment. The area which is getting developed is likely to give better long term return than an already developed and busy area. One can look for a business park in an upcoming location with good amenities to attract the right tenant. The facilities add to the attraction along with well laid infrastructure.
- Right stage entry- The risk factor varies depending on the stage of development one makes an investment in. If you invest in office space during the pre or soft launch of the project the risk is at its highest. Even though the per square feet rate is the lowest, there is a lot of risk attached as the government clearance and land acquisition is mostly in process during the pre launch stage.
If investment is made when the construction is in early stage the possible delay on delivery can jeopardize the profit timeline. A safer time to get a good deal is when the construction is mid way and if one is more careful and conservative, then purchase should be done in fully constructed or completed projects.
When buying an office space for investment another point to consider is to avoid any type of assured return schemes and also check on all paperwork before signing the deal.
Shriram Business Park is one property which fits all the criterias making it a great investment opportunity