Invest in Commercial Property

How to Invest in Commercial Property in Africa

The Covid-19 pandemic has ushered in a period of volatility that has left many in doubt regarding the reliability of traditional investment vehicles, listed shares. By contrast, bricks and mortar have consistently offered more stable returns, albeit in the longer term. However, pause for a moment before you start looking for prime real estate to purchase. There are a few things to be aware of before you invest in residential or commercial property. For example, which of the two might be the better option?

Invest in Commercial PropertyWhy Invest in Commercial Property

If we base a comparison purely on relative returns, the earning potential of the latter is significantly higher compared to residential property, for example. Currently, you could expect an income yield of around 11 per cent compared with just 5 to 8 per cent income yield from an average residential rental. There are also several other reasons to favour this choice. Tenants of rented homes frequently fail to care for them, believing that their upkeep and the associated costs are the responsibilities of their landlords. One reason many people choose to invest in commercial property is the longer average lease terms that corporates sign. These typically range from 3 to 5 years, providing the landlord with stable income and lower cost of finance, compared to the annual renewal of residential leases. Furthermore, the premises will seldom be occupied for more than 8 to 10 hours daily, generating less wear and tear and fewer after-hours hassles. Finally, it is usually easier to communicate with business owners than with residential tenants, as the former will generally adopt a more business-like and professional manner.

These are some compelling reasons to focus on business premises. However, choosing the right type of establishment can also be crucial when you decide to invest in commercial property. Numerous international studies point out that logistics warehouses, data centres and light-industrial premises were the least affected by the pandemic. In contrast to most other businesses, they maintained high activity levels and strong tenant demand.

Next Steps for Potential Investors

GREA provides qualifying investors with direct exposure to real estate development projects across Africa, offering superior US-dollar income yields, backed by hard-currency long-term lease covenants from blue-chip counterparties.



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