Guide to Commercial Real Estate Investment

Thinking about to invest in commercial real estate in Perth?

Before you do, read this 8-page commercial real estate commercial property investment guide.

Keen to invest in commercial real estate – without risking everything?

Commercial property investment can be a risky business, but there are ways to minimise this risk by investing in cost-effective facilities.

If you buy the right commercial property, in the right location, at the right price, you will reap far greater rewards than residential investments. The figures don’t lie:

  • 1-2% residential gross rental yield
  • 6-8% commercial real estate rental yield

Why You Need This Guide

Not only does this guide detail what you need to consider when investing in a commercial property, but it also outlines the different types of commercial real estate investment you might be considering.

This guide is a must-read for anyone looking to invest in commercial real estate in Perth.

Download Commercial Investor Guide

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How to Save Money Leasing a Commercial Property in Perth

Are you considering leasing a commercial property in Perth? Starting up a new business or moving your existing company to a new location can be expensive.


Leasing a warehouse or industrial space requires serious consideration. Depending on the amount of space you need and the services you want to employ, there are several factors to consider before you sign on the dotted line.


Here are 6 tips to help you save money when leasing a commercial property.

Pay For Space According to How You Use it


The first step is to ensure you are paying for your warehouse space according to how you are using it. A simple determination of measurement can create an opportunity for saving money on a commercial lease. Determine how much of horizontal and vertical space will be utilised.


For example, will you be utilising a floor space only or do you need additional space to stack up your goods up to the ceiling? If so, make sure that there are no structural blockades like steel beams preventing you from arranging your products. If you have identified structural constraints do not pay for space you will not be using, talk to your landlord and save money on renting a warehouse.

Exclude Some Maintenance Costs


Maintenance costs are necessary costs for upkeep when renting a commercial property. Tenants are obliged to keep the property in good working condition but that does not mean you should pay all the costs. To save you money in the long term determine the following:

  • Who is responsible for performing and paying for fit outs and repairs?
  • Who is responsible for replacing equipment attached to the warehouse?
  • Would I be required to install signs?
  • Is the landlord willing to pay for future warehouse alterations and improvements?

The answers to these questions are important to know early because you do not want to discover you are responsible for such expenses after signing the contract. When negotiating your lease, it is recommended you include HVAC maintenance and servicing as a maintenance cost that you are responsible for any major repairs and alterations as the landlord’s responsibility. Learn more about the outgoings on commercial rental property.

Warehouse shelves

Optimise Use of Space


The importance of an efficient and safe workspace cannot be overstated. You can maximise the performance of your space utilising smart fit outs. Do not start with the racking, start with a plan for optimal flow of goods through your warehouse space. The most common fit outs to optimise your space include:

  • Walls and Partitioning
  • Lighting
  • Mezzanine Floors
  • Floor Coverings
  • Line marking
  • Shelving and Storage
  • Pallet Storage Solutions
  • Warehouse Equipment

Is your warehouse perfectly optimised already? Consider subleasing part of your property to a third party. This can be a good idea if you have more space, as it allows extra cash flow to help with the rent.

We’ve also put together a list of easy to understand tips that will help you be better informed when looking at Perth warehouses to lease and put you in a better position to negotiate the price of your rent.

Research Surrounding Properties


In an ideal world, your first lead is the right fit for your commercial space requirements. However, this is rarely the case. Review all surrounding similar properties and be aware of what they are charging per usable space. This will help you negotiate the rates for your space accordingly and give you an idea of how much room you have to haggle.


You could also introduce yourself to the commercial agents in the area and have them alert you to new properties on the market. If you can bid before anyone else, you might be able to get the price you want.

Review Your Contract Carefully

A commercial lease contract is a legally binding agreement. It is a technical document that can be difficult to understand.

Before you sign a contract, learn how to negotiate a commercial lease to get what you want and know what you’re committing to.

Your commercial lease agreement will contain a process for changing the rent, usually every year. Rent reviews are standard practice for commercial leases and could be an opportunity to save you money too. For example, you may choose to commit to a longer lease agreement and therefore be able to negotiate a lower rent.

Consult a Commercial Property Expert

If you’re still not sure how to save money on renting a commercial property, speak to the local commercial real estate experts at Ross Scarfone Real Estate. We specialise in commercial and industrial buildings for lease in Perth’s south-east corridor of Belmont, Welshpool, Kewdale and surrounds. You can view our entire list of properties to lease and request a tour of the available commercial rental properties in the area.

Contact us for your commercial real estate needs

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Auction on 24th Feb: 18 Division Street, Welshpool

On-site Auction Details

Location

18 Division Street, Welshpool

Date and time

11 am Wednesday 24 February 2021 (if not sold prior)

Overview

  • 1514sqm total land size
  • 8km To The Perth CBD
  • Rare Vacant Land In Welshpool
  • Wonderful Redevelopment Site
  • 2 Street Exposure

Location

Currently located on the North side of Division Street facing Leach Highway and 100 metres South of Babel Road, Welshpool. It is some 8 km from the Perth CBD and very accessible to all parts of the Metropolitan area via Welshpool and Orrong Roads, Graham Farmer Freeway, Leach, Tonkin, and Roe Highways.

Lot Dimensions

(not to scale)

An irregular shaped block having an effective frontage to Division Street of 59.7 metres, a frontage to Leach Highway of 54.9 metres and a northern boundary of 63.9 metres with a Land Area of 1514 square metres.

Zoning

The property is zoned “GENERAL INDUSTRIAL” under the current City of Canning Town Planning Scheme.

Title Details

Portion of Canning Location 2 and being Lot 786 on Deposited Plan 30211 and the whole of land comprised in Certificate of Title Volume 2218 and Folio 382.

Services

All the services including water, electricity and NBN are available to the site.

Improvements

The site is fully fenced with chain link fencing and two double gates to access the property. The yard is fully hardstand with road base suitable for all vehicles and containers.

There is a 20 foot container which is connected to power and NBN. The property is fitted with an alarm system and surveillance cameras providing excellent security to the property.

General Comments

A wonderful opportunity for the OWNER OCCUPIER or DEVELOPER to buy a vacant site in this very strong and established INDUSTRIAL AREA. This property will benefit greatly from the New LEACH HIGHWAY FLYOVER and proposed roundabout on WELSHPOOL ROAD by becoming the first property NORTH on Welshpool Road. The property exposure will increase greatly by adjoining LEACH HIGHWAY off-ramp.

Conditions of Sale

A 10% deposit is payable on the fall of the hammer with the balance of the purchase price to be paid on the 29th March 2021. (The standard REIWA Particulars and Conditions of Sale of Freehold Property will be used).

Please note that offers will be considered prior to auction.

Further Details

For further details and documentation please contact the Seller’s Agent, Ross Scarfone Real Estate.

Contact Form

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Disclaimer: the particulars on this webpage are supplied for information only and shall not be taken as a representation in any respect on the part of the Vendor or his Agent.

Welshpool Commercial Real Estate: Lease Guide

As one of Perth’s premier industrial areas, you’ll find Welshpool commercial property located within the City of Canning, in the inner south-east of Perth. It boasts straightforward access to main highways, with close proximity to Perth Airport and only a short distance from Perth CBD.

Welshpool is a popular location for commercial real estate because, compared to Perth’s other main industrial areas, accessibility and distribution times are quick and direct. The main highways surrounding Welshpool will quickly have your light and heavy vehicles quickly heading in any direction in WA. The Roe Highway runs to the Great Eastern Highway as well as to the South West, whereas the Leach Hwy connects Perth Airport through to the Fremantle Port.

Welshpool commercial property

Welshpool’s commercial property typically consists of warehouses, office warehouses, and offices with storage, catering to a range of commercial and industrial businesses. As one of Perth’s main industrial areas, Welshpool infrastructure accommodates heavy machinery and trucks, and is supported by growing surrounding suburbs which fuel employment for the area’s industry sectors.

Those main sectors in order of prominence include:

  • Manufacturing
  • Wholesale Trade
  • Construction
  • Transport, Postal & Warehousing

Here are the commercial property types available in Welshpool and why you should consider Welshpool for your next commercial lease.

Office Warehouses for Rent in Welshpool

Given the convenient access to arterial roads and logistical hubs, many of the existing commercial property structures available in Welshpool are office warehouses.

The high volume of commercial property in Welshpool means there is consistent availability of commercial properties for lease and sale. Office warehouses in Welshpool vary in size, from relatively small 350 sqm to huge 4600 sqm of floor and land space, allowing you the ability to choose a commercial property size that suits your business operations. A wide variation on property configuration is also evident, making finding the right office to warehouse configuration a less complicated task.

Welshpool office warehouse for rent

Why lease an office warehouse in Welshpool?

An office warehouse leased in Welshpool, will position your business in an easily accessible location for staff and customers, and enable your business to efficiently provide goods and services throughout Perth and WA.

The surrounding highways are built for volume and heavy freight transport and access. An office warehouse in Welshpool will have access to these whilst also providing your business with a manufacturing, distribution or warehousing hub for your company, and one that is positioned to reduce transport costs both in and out of the business.

Warehouses for Rent in Welshpool

Welshpool offers a wide range of warehouse sizes and configurations, with singular or multiple access ways, and with low or high exposure to passing traffic, neither of which being far from the main highways.

Welshpool has been an industrial area for decades, meaning you’ll be able to find older properties in varying condition, up to very presentable modern warehouses for rent or purchase. This variation means that Welshpool has a wide selection of commercial properties for lease, no matter what your available budget or requirements are.

Warehouse for rent in Welshpool

Why lease an warehouse in Welshpool?

Welshpool is one of the main industrial areas of Perth owed partly to the fact of its proximity to Perth Airport and short distance to the Perth CBD. Finding a cost-effective warehousing solution is half the battle and is improved with efficient transport and distribution costs.

As a warehousing location, Welshpool will allow transport simple access to your goods, through unrivaled access to key road infrastructure and transport networks, with the Kewdale Freight Terminal in the neighbouring suburb.

Offices for Lease in Welshpool

Existing offices in Welshpool are in short supply unless looking for office warehouses, with the warehouse component being predominantly used as storage. The other form of property available in Welshpool are secured yards or hardstands, in some cases with relatively high exposure to passing traffic. This property type presents lower overheads provided the layout meets your commercial requirements.

Strategically located close to the Perth CBD, Kewdale freight terminal and major transport routes, Welshpool provides an excellent location for industry to do business.

Office for lease in Welshpool

Why lease an office in Welshpool?

For those offices located in Welshpool, they are well placed to offer services to the south eastern corridor industrial areas, Perth CBD, Victoria Park and Perth’s south-east. For some context, there are over 800 businesses in Welshpool and over 8000 in the wider City of Canning, making it one of Perth’s busiest commercial areas.

Commuting to residential or commercial clients will be made easy through the straightforward access to main arterial roads including Orrong Rd, Welshpool Rd, Leach Hwy & Roe Hwy – the main highways providing access to all of Perth.

Major shopping centres are scattered across the City of Canning, which is in fact home to Westfield Carousel, WA’s largest shopping mall. Small businesses, home businesses, and cottage industries are dotted throughout the suburbs, providing a wide range of services to residents.

Welshpool is seen as a premium industrial location with office warehouses offering you a range of size and configuration options to suit your property requirements. If you are looking to lease in Welshpool or put your commercial property on the market, be it office warehouse or hardstand for lease, contact us today.

Contact us about commercial real estate in Welshpool today

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Find Your Perfect Commercial Real Estate Agent

When it comes to choosing a commercial real estate agent, it’s important to find one who will be able to help you reach your goals, whether that includes selling, leasing, buying, investing, or developing.

Navigating these complexities can be overwhelming. Although, it doesn’t have to be if you find the right agent to support you. The right agent should understand your business needs, their local area, and be highly experienced and well-connected. They should have an exceptional portfolio of clients and properties.

Your agent should also ensure they develop a positive relationship with you, as you should have a good customer experience throughout your property journey.


They Should Know Their Local Area

When choosing a commercial real estate agent in Perth, it’s important to find an expert in your location of interest.

In terms of industrial real estate, there are four main quadrants within Perth:

  • South East Perth – includes Belmont, Canning Vale, Forrestdale, Kewdale, Maddington & Welshpool.
  • North West Perth – includes Balcatta, Joondalup, Landsdale, Wangara & Yanchep.
  • North East Perth – includes Bassendean, Bayswater, Bellevue, Malaga, Midvale, Morley & Osborne Park.
  • South West Perth – includes Bibra Lake, Cockburn Central, Jandakot, Naval Base, O’Connor, Port Kennedy & Rockingham.

If you want to rent or purchase a commercial property, it’s important to choose an area that has the infrastructure, arterial roads, and zoning that best suits your business’ needs. From there, you should find a real estate agent who is an expert in your desired location.

Within the South East Perth quadrant, Ross Scarfone Real Estate are experts in the commercial and industrial real estate sector. They have over 30 years of proven experience.


Find an Agent Who Understands Your Business

A good commercial real estate agent should have a niche that they really understand. When you are meeting with a potential agent, you need to find out whether they are a good fit to work with your business. You need to know that they really understand your requirements.

This means that if you are looking to rent, the commercial leasing agent should recognise your customer profile, and understand your day-to-day operations, turnover estimates, and the equipment and human resources that your business requires. They should also try to gain insight into what your future business plans are, so they are aware of how they might affect your requirements in terms of space, facilities, or the length and terms of the contract.

Your commercial real estate agent should be able to guide you to consider all necessary details about a new office, storage or warehouse space before you even really start looking, let alone commit.

In understanding your business, they should be able to scout for suitable properties within a specific location and present them to you, reducing your stress and giving you more time to focus on your business.

If you are looking to buy, sell or to lease your property, the real estate agent should also understand your business and financial needs.


Choose an Experienced Commercial Real Estate Agent

An experienced commercial real estate agent is essential when it comes to finding the perfect property with the right contract in place.

They should have a transparent portfolio of properties and clients that align with your business requirements. You need to ensure they have successfully looked after similar clients in the past, that have been of a similar size, complexity, and type to yours. While you are researching this, ensure they have a good reputation and that their previous clients would recommend them.

Your agent should also have an in-depth understanding of selling, renting, leasing, or buying a property from start to finish, so they can advise you on that process. This means they will be able to walk you through the documents and other information you will need to have.


A Well-Connected Real Estate Agent Is the Key to Your Success

Your commercial real estate agent should not only understand your business, have proven experience, and be an expert in property in your local area — they should also be well-connected.

This means they should have both local market awareness, and the ability to assist you if you need to relocate or expand in a different area. For example, if you are looking to do business interstate or overseas, they should be able to utilise their connections to ensure you have a smooth transition.

They should also have contacts to key personnel across the property sector, including financial institutions, solicitors, and surveyors. By utilising these connections, they should be able to guide you through every step of the leasing process by referring you on as necessary.

Ensure Your Commercial Real Estate Agent Communicates Well

Your commercial real estate agent should be available to you via phone, mobile and email, both inside and outside office hours (within reason). They should be able to communicate openly and honestly about all matters regarding your business premises and get all key information across to you succinctly.

It’s important you are able to understand what the agent is trying to communicate, so misunderstandings don’t arise —you need to know exactly what is in the contract and what you are getting as part of the deal.

If you need a commercial and industrial real estate agent or property manager in Perth, Ross Scarfone Real Estate has extensive experience and knowledge of the property market in the South East Perth region. They have been helping businesses thrive for over 30 years by leasing commercial real estate, including small offices, storage yards, and industrial warehouses, in an ethical and professional manner.

Ross Scarfone Real Estate - Commercial Property Agent Perth

Contact us for your commercial real estate needs

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The Truth About Rent Reviews, Increases, and Commercial Leases

Whether you’re a tenant or a property owner, your commercial lease agreement will contain a process for changing the rent, usually every year. 

Commercial leases are technical documents that can be quite difficult for a layperson to understand. So, to help you make an informed decision about your rent review, we’ve broken down the process and how it could impact you.

What is a commercial lease rent review?

The rent review of a commercial lease is the process of assessing if the current rent is in line with the market trends. 

Rent reviews are standard practice for commercial leases and you should anticipate the rent to change throughout the term of the lease.

If you’re a landlord, reviewing the rent every year can lead to an increase in income and ensures you’re keeping pace with the market. 

For a tenant, a rent review can lead to a change in rent, either up or down, depending on how the commercial lease is written.

Rent reviews must be written in the commercial lease agreement

In the commercial lease, it will be set when and how the rent will change. In most cases, the rent will change each year, but there can be variations. 

If you’re going to negotiate when and how the rent is reviewed, it must be before the commercial lease is signed. 

In the commercial lease agreement, it will stipulate:

  • the method of the review – how the new rent is determined, and,
  • the regularity of the review – when the rent amount will change

There are 3 types of commercial rent reviews

  1. CPI increase
  2. Fixed increase 
  3. Market reviews

CPI increase

CPI (Consumer Price Index) increases are done every year and depend on the rate of inflation at the time or the 12-month CPI adjustment.

The CPI is determined by the government and is published by the Australia Bureau of Statistics (ABS) each year. 

For Landlords

In most cases, landlords would be reluctant to rely on just on CPI increases as it disadvantages them financially. A CPI increase is usually lower than the other review methods as it doesn’t consider market demand or value of the property. 

To address this, landlords will pair CPI increases with a fixed increase, or stipulate that the CPI increase must be higher than a pre-determined fixed increase.

For Tenants

As CPI increases have been small in recent years, CPI rent increases can be beneficial to tenants. There is, however, a level of unpredictability and some tenants may prefer to know what to expect. 

Fixed increase

A fixed rent review is a set rent increase percentage, usually annually on the anniversary of the lease start date. 

The rent increase percentage is usually between 2%-5%, so every year tenants can expect the rent to increase by this amount. 

For Landlords

While fixed rent increase provides predictability and stability, there is the potential to miss out on larger increases from market reviews. If the market is hot, the fixed percentage amount set at the start of the lease might be less than what the market is willing to pay. 

However, if the market is dropping, you may end up receiving a higher rental income than your neighbour. 

For Tenants

For tenants, fixed rental increases have the opposite benefits. If the market is low and you’re able to negotiate a fixed rental review, you could maintain lower rent for years. 

But if the market if climbing, your commercial lease agreement might set a higher percentage increase to match the market at the time. If the market or economy doesn’t meet expectations, you could be locked into above-average rental prices that are out of proportion to your business income.

Market rent reviews

A market rent review will change the rental amount to be inline with the property market and similar commercial properties. 

To determine the market value, an independent valuation will be conducted to avoid disputes. 

Compared to a fixed increase, a market review will allow the rent to be reset and remain consistent with the economy. 

Usually, market reviews are reserved for the end of a commercial lease, if both parties wish to renew the lease. 

For Landlords

For commercial properties, a market rent review completely depends on the state of the property market and economy at the end of the lease. But such is the nature of commercial property investment. 

Ideally, if the market is increasing, regular market rent reviews will allow you to keep pace and continue increasing the rent at higher rates than a fixed review. 

On the flip side, if the market is decreasing, a market review could see your rental income decrease. 

For Tenants

While a market rent review for tenants can be an opportunity to reset the rent to align with your business’s income, it could also result in a rent increase that will be maintained for the term of the lease. 

Alternative commercial rent reviews

Some commercial lease agreements may vary the method of rent increase year to year. For example, instead of a fixed increase every year, the lease could include a market rental review every two years. 

By not having one type of commercial rent review through the entire lease, landlords and tenants benefit from low-risk terms. 

A tenant will know what the rental increase is every two years and have some predictability and a landlord can capitalise on market increases with the addition of stability of fixed increases if the market doesn’t perform. 

Changing your commercial rent increases  

Unless otherwise agreed, you may be able to negotiate a change in the rental review structure when renewing the commercial lease. 

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How to Negotiate a Commercial Lease

How long will it take to negotiate a commercial lease?

Negotiating a commercial lease can take weeks or months, by anticipating this you can avoid putting yourself under pressure to sign a commercial lease before you’re satisfied with the terms.

Not only could there be several back-and-forths on the terms of the lease and the cost of rent, but properly reviewing the offers and contracts will also be time-consuming.

Then you will need to seek professional financial and legal advice on the terms of the lease. This is something we highly recommend, and we’ll speak about in more detail later, but will also take time as your advisors do their due diligence by examining the commercial lease agreement and explain the business liabilities to you.

What is negotiable in a commercial lease?

Essentially, everything is on the table for discussion when negotiating a commercial lease. Before negotiating consider what you want and what you’re willing to give up to get it.

There may be some terms that aren’t important to you but could be to the other party. Review the list below for some ideas and figure out what you need for each:

  • Rent
  • Length of the lease
  • Options to renew
  • Rent reviews
  • Permitted use
  • Tenancy mix and competition
  • Fixtures and fit-out
  • Operating costs
  • Repairs and maintenance
  • Assignment and sub-leasing
  • Default and breaches
  • Redevelopment and relocation
  • Termination

Get professional commercial lease advice

We can’t stress enough that you should seek professional legal, financial, and business advice before signing a commercial lease.

  1. There may be terms in the lease that you don’t fully understand or comprehend the ramifications of. You mustn’t commit to something you don’t understand.
  2. Signing a commercial lease will directly impact your business. Your outgoing costs will change, as will your liabilities and responsibilities.
  3. You are taking on a financial obligation that could last years. Getting professional financial advice will help you predict if you’re able to meet the commitment.
  4. By signing a commercial lease, you’re entering a legal binding contract. A legal advisor will explain the consequences of breaking the terms of the lease, by either party.
  5. Learn what you’re rights are in case yours or the other party’s situation changes, you’ll know what you’re entitled to.

Get offers in writing

When negotiating a commercial lease, there can be several parties communicating offers and lease terms. This includes the prospective tenants, landlords, and the agents for either. With all the phone calls and conversations that could be happening, there may be a miscommunication that could impact the entire negotiation.

When you receive a verbal offer, ask for an email summarising the terms. This will avoid any last-minute surprises that weren’t mentioned, or if you decide to counteroffer, there will be a record of the exchange.

Understand the market

Spend as much time as possible researching the commercial property market, specifically looking for similar properties to the one you’re negotiating on.

Commercial lease prices are determined by the market and fluctuate year-to-year, even month-to-month. Don’t expect to pay much less than the market average, but you shouldn’t need to pay more unless there are other favourable terms in the lease.

To learn what you should expect to pay, look on commercial real estate websites and commercial agent websites to compare similar properties and calculate the cost per square metre. This will give you a ballpark price and something to negotiate with.

TIP: The longer a property has been on the market, the more likely an owner is to be flexible on commercial lease terms. If a property has been on the market a while, it usually indicates the owner overestimated the market price and could lead to a price reduction.

There’s more to a commercial lease that the rent

Rather than negotiating purely overly the price of rent, understand that there are other factors in a commercial lease that you can bring to the table.

Of course, landlords are looking to receive as much rent as possible but they’re also looking to keep their costs down. Understanding this will allow you to make counteroffers with more variables that can bridge the gap between their price and yours.

  • Shorter settlement periods
  • Rent-free periods
  • Longer lease
  • Lower fit-out costs

Always get something in return

It’s natural in commercial lease negotiations that you will have to concede on some points to bring the deal together. If you do this, try to get something in return for what you’re giving up.

If they’re at their final offer on the price of rent, suggest they pay for other property costs:

  • Repairs and maintenance
  • Fit-out
  • Signage
  • Parking

If you’re looking for commercial property to lease in Perth, take a look at our latest listings or contact us for an obligation-free tour of the properties.

Contact us about your commercial leasing needs

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