Commercial property can look appealing to trades and construction business owners. It may offer stronger cash flow, a chance to own your premises and a way to diversify beyond residential property. But it is unfamiliar territory, where a good-looking building can become a poor investment if the lease, tenant or local market is wrong.
On Built. Trusted. Chosen., I spoke with Cameron Jay, a commercial buyer’s agent and Director of Investwise Property. We discussed the difference between investing and speculating, whether to buy your business premises, and why knowledge is one of the best forms of risk control.
An investment should wash its own face
Cameron drew a clear distinction between investment and speculation. When someone buys a property and must keep contributing money each month, they are relying heavily on future capital growth to justify the cost.
A commercial investment should ideally “wash its own face” from the beginning. The rent should cover the property’s costs and leave the owner in a sustainable position.
That does not guarantee success, but it means the asset is producing income rather than continually demanding more money while the owner waits for its value to rise.
Knowledge offsets risk
One of Cameron’s recurring principles was that knowledge offsets risk. Buyers need to understand how many potential occupants could use a space.
A restaurant in a good retail strip may be converted into another type of shop. A basic warehouse can appeal to many businesses. A refrigerated warehouse, however, has specialised equipment, added complexity and a much smaller tenant pool.
Cameron’s blunt example was never to buy a flour mill, because the mill may be the only party that will ever rent it. The practical question is not whether a property looks impressive. It is how versatile it is and how broad its future market could be.
Buy the lease and tenant before the building
For an investment property, Cameron starts with the lease rather than the physical building. He examines how long the tenant has been there, how securely the business fits the location, whether the business appears sustainable and what lease options remain.
This explains why a property with a strong, established tenant may sell at a lower yield. Buyers pay a premium for perceived security.
For trades and construction owners, the lesson is not to become emotionally attached to the shed, office or showroom. The building matters, but its income depends on the tenancy supporting it. As Cameron put it, the building comes last.
Owning your premises is not the only path
Buying the property your business occupies can make sense, especially when the location works well and moving could cost customers, time and money.
However, the landlord may refuse to sell or demand too much because they know the tenant is settled.
Cameron’s alternative is “parallel investing”. The business continues renting the premises that suit it, while the owner buys another commercial property that may perform better.
Someone else then pays rent towards the owner’s asset while the business remains where it operates best. It is the commercial equivalent of rentvesting and removes the pressure to force an unsuitable purchase.
The same property can be a smart buy or a poor investment
Cameron used Geelong’s industrial market to show how purpose changes the decision. An oversupply of small industrial units may create good buying conditions for an owner-occupier wanting a workshop or warehouse.
The same oversupply can make the identical property unattractive to an investor, because they may compete with many vacant units for a tenant.
Broad claims about a “good market” can therefore be misleading. Buyers must understand current supply, demand and their reason for purchasing. Conditions that help an owner-occupier negotiate can increase vacancy risk for an investor.
Specialist advice can create speed, safety and value
Commercial finance differs from residential lending. Cameron explained that buyers may need a larger deposit, while banks pay closer attention to lease income and tenant strength.
That makes specialist support important. A broker who regularly handles commercial transactions is more likely to understand the lender’s requirements than someone who only occasionally arranges one.
The same applies to sourcing and negotiation. An experienced adviser can assess the lease, supply, tenant and hidden risks before the buyer commits.
The value is not only a better purchase price. It is also speed, safety and the confidence to walk away from the wrong deal.
The central message from my conversation with Cameron was simple: do not buy commercial property based on the building alone. Start with your goals, understand the lease and tenant, examine local supply, and use specialist knowledge to reduce avoidable risk.
Guest bio
Cameron Jay is the Director of Investwise Property and a commercial buyer’s agent who helps Australian investors and business owners source, negotiate and secure commercial property. Drawing on decades of business experience and a background in commercial real estate, he focuses on identifying risk, assessing leases and tenants, and finding opportunities suited to each buyer’s goals.
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