How to buy recession-proof and internet-proof properties

CommercialTuesday 11 October 2016

Post by Stephen Lovison, Burgess Rawson Sydney

No matter the economic conditions, some property investments appear to be bullet proof.

The quick service food and service station industries are perceived to be near recession proof as they’re considered necessary to continue our way of life. For example, in an economic downturn the Australian public will continue their frequency of visits to fast food outlets and fuel purchases are a necessity to get around.

Similarly, the demand for childcare in Australia is steadily growing, resulting in local investors having the opportunity to diversify into an asset sector unaffected by offshore economic factors as well as an industry with no risk of being replaced by the internet.

From buying to managing – here’s 4 steps investors can take to increase their property’s chances of surviving an economic downturn:

1. Consider commercial over residential

Commercial property investments often comprise stronger yields as well as attractive lease periods with a usual minimum lease period of 3 years compared to the maximum 12 month lease for residential properties. With a secure tenant your investment will have a better chance at riding out an economic downturn.

When it comes to commercial property, the often expensive ongoing costs such as rates and repairs are generally the responsibility of the tenant, as opposed to residential properties where the cost is borne by the landlord, as discussed in our previous blog post ‘Why you might invest in commercial over residential property‘.

2. Make sure the property is attractive to tenants.

There are many different types of tenants you may be wishing to attract to your commercial property investment and location is vital. If you’re looking to have a service station as your tenant, purchasing a large corner land parcel on a busy main road will be more attractive to big name tenants compared to a site in the back streets with little to no traffic.

3. Research your tenant

As above we’ve mentioned how fast food, service stations and childcare centres are all good investments during changes in our economic conditions.

However, if you’re looking at purchasing a retail investment ensure that you have an established tenant with strong trade. A retail store with an omni-channel approach (online and instore sales) will be stronger as well as less susceptible to online shopping.

4. Work with a professional commercial property manager

An experienced commercial property manager can help to ensure your property investment maintains its highest value possible. Your property manager can not only ensure you have strong and reliable tenants on terms beneficial to the landlord such as fixed 3 to 5% annual rental increases but also is able to handle your lease negotiations to ensure your tenants re-sign and continue to occupy your property. This will help guarantee your rental income.

To learn more on commercial property investment and current market conditions feel free to contact us.