Many financial gurus will tell you property is a good way to diversify an income portfolio and will be one of the foundations of any income-generating portfolio. But why is commercial property – specifically office space – a good investment bet? Here are five reasons why I believe investing in office space in this market makes sound investment sense.
- Investment stability
Markets around the world have been doing all sorts of dips, dives and surges in recent years, with the stock market being particularly volatile. Investors these days are looking for tangible assets that are less volatile than the stock market, but which also provide yield and capital appreciation. Achieving stability is possible through investment in commercial real estate, particularly as it is a long-term investment option.
- Smart time to buy
Interest rates are bound to go up over the next 12 months, but they are still at relatively low levels. Added to this, pricing in the office space market still offers investors good value for money. Small to medium business owners are gravitating towards owning their own office space– a clear precursor to the market turning, however, a number of external variables can delay or accelerate the upturn.
- Rental income and capital returns
Aside from diversifying a real estate portfolio, office space investment is a good way to earn high rental income as well as solid capital appreciation. Commercial properties tend to generate more rental income compared to residential properties – roughly 8%-13% yield compared to a 5%-7% yield from residential investments. While commercial properties require larger investment amounts than residential properties, they are often said to be a more prudent real estate investment if the buyer has the necessary equity available.