Hello all, Newbie here, newbie not only to this forum but to the world of property! If my questions comes across as bit too stupid/daft, please be patient because I am not too bright with regards to illiquid assets. I happened to come across some commercial office spaces (around 50-60sqm) in Adelaide CBD up for sale. Yields are around 10-15%. I am presuming that the strata/buliding management/PM fees etc will be taken care off by the tenant (if tenanted) What are the pitfalls of buying small office spaces? How do banks assess servicability/LVR on such spaces? If you were to buy such spaces what would be your reasons? If you have any recommendation for a buyers-agent, please do let me know? I am not planning on buying anything soon but may be within the next year or so. Wanted to get started on understanding the landscape and how to manoeuver. Note: I may not respond immediately as I will be out of reach of internet for next week or so.
5000 postcode is on the restricted list for many commercial lenders. 50-60sqm is the D grade tenant pool size tenancy, better off in something CBD fringe or slightly further out.
Thanks DaveM. Does restricted list mean "we will not lend" or high-default? What is definition of a D-grade tenant? Would a 50-60SqM office space at fringes of CBD/suburbs be attractive options?
There are some lenders which are restricting CBD postcodes with lower quality properties/tenancies. This can mean a reduction in LVR or complete lack of lending depending on the appetite/risk at the time. Small office spaces right now aren't great for getting tenancies/decent tenants - there's a reason why the yields are as you're saying. Even then - 10%+ is huge where is should be circa 7%, which suggests a higher risk. As an example when we moved offices a little over a year ago in the city fringe, we were able to secure significantly strong terms for the lease with rent free periods etc. One of the other tenancies we considered is still vacant and has been for almost 2 years. 50-60sqm is quite small for an office so you're going to be catering to very small businesses which are more likely to leave than become established long term tenants.
I was about to post about adelaide commercial, on Why commercial thread. interested to see if @Beano has any assets in adelaide and what yields was h aiming at. I too noticed a lot of deals there offer around 7.8%-8.5% both CBD and fringe. Anyone else has commercial in adelaide and what was your experience like with it?
