Buying vacant vs tenanted commercial property

Vacant properties are worth less than tenanted property but how much less or percentage wise is the difference? Eg. a tenanted property sells for a 5% net yield. How much less percentage wise should the exact same property be worth vacant?

Another question, when a lease is getting close to expiry the value of the property is meant to be worth less & sell on a higher yield. At what time frame prior to the expiry of a lease does it start going down and my roughly what percentage?

 

Vacant, or lease soon to expire, also makes finance trickier. There's more options available to you in commercial space with tenanted props.

 

You can't generalise
If there are owner occupiers wishing to buy a vacant property it may well be more expensive than a tenanted property
There are many variables like type of property, size of the premise, location , etc
But as a investor you do have to factor in
1 the 2 mths real estate agency fee
2 vacancy period
3 fitout required
4 rent free period
5 marketing cost
6 interest and outgoings whilst vacant
What type of property do you have in mind?

 

On the lower north shore vacant properties are currently worth more. I have owners paying tenants to end their lease early so they can get a sale over the line.

 

Didn't really have a type in mind, was more a general question of the whole commercial market, but if I was to be more specific I'd say childcare centres, offices & retail space.

 

So there could be an opportunity of picking up some newly built childcare centres untenanted at near land value (as comp sales must be at these values for banks to value them at land value), finding your own tenant and instantly adding good value to the property?

 

It varies so much. If your property has a 20 year lease to Woolworths the value impact is so much different than compared to a 3 year lease to a trucking company.

If you buy a commercial property with a tenant the DD on the strength of the tenant is paramount.

 

Meh, the last time I looked at CIPs about a year ago, in Moorabbin, Clayton and parts of Springvale, even vacated properties were very expensive vis a vis even the residential market. Asking ridiculous premiums, so even if someone was to buy and found a tenant themselves, I'd highly doubt you could make any $ on it.

 

With every challenge is an opportunity. You'd need to probably get a tenant to sign a lease or provide irrevocable evidence to show they're committed. As some of the others have said, tenant quality and tenure of the lease is key (amongst a few other things). Also Childcare centres as subject to different lending criteria's than you stock standard commercial property because its deemed a 'goodwill' asset. That tenant will most likely have to meet a DSCR covenant or ICR of some level in conjunction with them either being leasehold or freehold.