INVESTING IN COMMERCIAL AND INDUSTRIAL PROPERTIES
When it comes to investing in real estate/properties, irrespective of whether it’s residential,
commercial, or industrial, it’s important to take a cautious and objective approach as the investments
need to meet certain criteria to ensure it provides financial returns of good value.
Good Capital appreciation, rental values that provide a good return on investment (ROI), and good
demand from tenants are some of the basic criteria.
Unlike residential properties where the options are plentiful and prices can range from a few hundred
thousand upwards, commercial and industrial properties have fewer options in comparison and
purchase prices tend to cost more.
There are many reasons why investors should consider investing in Commercial and Industrial
properties. Some of the main reasons include its consistent rental appreciation, (this is dependent on
location), longer tenancy/lease periods, lesser maintenance costs, minimal fit-out costs, and capital
appreciation in the longer term.
Take time to do the math, research past transactions, and the availability of units for sale and rent,
as supply and demand are huge considerations.
When investing in a property, pay careful attention to the following:
Location – Not only will it affect the value of the property, but it will also affect the rent you can
charge. When inflation is high or in economic downturns, properties in prime locations tend to hold
their value better than those in less desirable areas.
Type of Property – The type of property you’re considering is also important.
Commercial and industrial properties in sought-after locations tend to see growth in value even in
challenging times. Today the value of industrial properties in locations closer to the ports and airports
are fast appreciating in value due to the growing prominence and demand from “E-Commerce”.
Rental Income – There are several factors that affect rental values. Supply & Demand and location
are the two pertinent factors. There are other mitigating factors but these factors tend to be of lesser
significance.
It is a common fact that Industrial & Commercial properties tend to rent for longer periods. Lease /
rental terms for 6-12 years are the accepted norm. This allows for stable returns to the investor for a
long period which in turn puts less stress on the investor’s finances.
Financing – Be prepared for higher interest rates in challenging times as this may affect cash flow.
If you’re purchasing/investing via a company, SME Financing is an option to be considered as the
margins of finance and the terms of engagement are attractive. All local Malaysian banks have an
SME Division.
Doing your research and working with a knowledgeable banker is of Importance as they will be able
to advise on all the financing options available.
Inflation – Generally speaking, when it comes to real estate, investors should not be too concerned
about rising inflation. The general view is that property investors tend to benefit from inflation.
Property has always been a good hedge against inflation.
Property Owners vs Property Investors – property owners greatly differ from property investors.
Not all property owners are property investors.
For example, if you are a residential property owner and your property is not generating any cash
flow via rental income, (eg your home that you are staying in) that makes your home/apartment a
property that’s referred to as a “Lazy Equity Property”.
On the other hand, if you own a rental property that’s generating cash flow, then that property is an
asset and you as the owner will be considered a real estate investor. Real estate becomes an asset if
it has cash flow—through rental income.
Property Investments in commercial and industrial properties in “good locations”, are not adversely
affected by inflation or economic downturns, as the tenants that rent these properties tend to be
financially stronger and businesses are usually able to withstand these uncertainties. This provides
the investor with a hedge or leverage against inflation and economic uncertainties.
Question
Is Commercial & Industrial real estate the right investment for everybody? Probably not.
Many investors tend to make emotional decisions when investing. This is especially so with residential
properties. Emotional decisions on commercial and industrial properties can lead to inferior returns on
capital invested.
About Carey Real Estate and the Services, We Offer
We were established in 1983 with offices in KL, Penang, and Kota Kinabalu. The Company is focused
on Commercial & Industrial Property Investments, and the sale of land. (Agri, Commercial, Industrial,
Plantations, Development Land).
We are sensitive to the fact that Investors have differing needs, preferences & budgets. We
understand that there is no such thing as a “One Size Fits All” when it comes to property
investments.
As such we “Customize” our offerings to prospective investors based on each investor’s needs and
preferences.
Our emphasis and specialization are on Commercial & Industrial properties. The properties we offer
for investment range from RM2 million onwards.
Our services also include Fortnightly Updates – we email or text prospective investors about various
new property investment opportunities based on each investor’s specific preferences and criteria.
Should you be considering investing in a commercial or industrial property, kindly fill out the form
below for us to keep you updated on property investment opportunities on a regular basis.
We can also assist with financing, taxes, and legal matters as we have a team of professional
companies that we work closely with.
