The Impact of Cheap Money on Commercial Property

Falling interest rates are further boosting the commercial property market.

Investor confidence is strong, and as a team, we are finding quality properties are being snapped up by a wider profile of investors, which highlights the availability of money for all.

Viranda Asset Manager, Caroline McNaught reflects, “the appetite for commercial real estate is coming at us from all corners. Viranda acts directly for its clients, and in the past the typical client profile may have been fairly defined. Now, the depth of interest is varied. ‘Mum and Dad’ investors are recognising that better returns can be had with commercial property over traditional term deposits or residential rental properties. We recently helped a client purchase a small retail unit on Lake Road, Takapuna. It was this client’s first commercial investment and it now has a long term lease in place. That’s just one example of many investors turning to commercial property at an entry level.”

We’ll likely see more novice investors coming through if the market continues to provide healthy returns for long term rental income (at prices that won’t sting). At Viranda, it’s our focus to find a property that best suits our clients’ investment needs. The merits of commercial real estate over residential is that under most commercial leases the tenant covers outgoings such as rates and insurance – essentially the yield to an investor is net. Residential landlords usually pay the outgoings, so the reported yield is gross. But of course, with the lower cost of borrowing, the commercial real estate demand gets bolstered, which in turn pushes property values up and rental yields become sharper.

In any situation, you can’t beat good advice – so please reach out if you would like to discuss your situation and how we can get the best possible results for you in this fascinating market.

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