The Pros and Cons of Investing in Commercial Real Estate

Commercial real estate is a property used for commercial purposes by businesses and organizations. They can be used as office premises, retail spaces, storage facilities, or any other commercial purpose. With the economic growth, the demand for commercial projects in Pune is also growing. Investing in commercial properties in Pune can be very advantageous. It can also have some challenges. By managing the property investment, the investor can minimize the disadvantages and maximize the advantages. 

Let us look at this closely:

Pros of investing in real estate:

1. Higher returns

The average rental return on commercial is higher than residential properties in Pune. Investing in commercial real estate gives higher returns with a higher appreciation in property value. 

2. Longer lease period

Commercial projects in Pune are usually leased by businesses for long periods for a minimum period of 3 to 5 years. If the tenants are secure and stable like large companies or government organizations, then the lease can be renewed. This means the cost and effort of looking for new tenants in short periods is saved. 

3.    Stability

Commercial properties are leased out to businesses or organizations and if they are large and reputed then they tend to be reliable too. Such organizations are professional and follow ethical business practices. The owners do not have to worry about payment defaults, eviction, or property damages by such tenants. It thus becomes important to do a thorough background check of the tenants before leasing the premises.

4.    Reduced costs

The tenants who lease commercial properties usually get the interiors done as per their requirements. The premises are a reflection of the business and most organizations are particular about the office interiors. The owner can thus lease out the property in the raw form saving the cost of interior design and furnishing. 

Cons of investing in real estate

1.    Higher cost

It is well known that commercial real estate is more expensive than residential real estate. The investor must shell out more for a commercial property. They may have to reshuffle their investment portfolio to manage their funds effectively. A proper analysis of investment versus returns can give a better picture to the investor if they should park funds in a commercial property.

2. Longer lease period

The returns on the commercial property are dependent on the overall economic scenario. If the economy slows down it directly affects the demand for commercial properties and the rentals they generate. During the pandemic, the commercial property market experienced a serious downfall due to economic slowdown and because offices opted for remote work.  

3.    Difficult to liquidate

Commercial property is difficult to liquidate when compared to other investment options like stocks and bonds. It is difficult to sell the property fast as many factors come into play. Potential buyers and tenants consider the location of the property, its size, and usability before they decide on buying it. Selling the commercial property can be a time-consuming process as it may take a few years to sell. 

Although investing in commercial real estate is a lucrative deal, investors must consider the risks associated with it. By weighing the pros and cons and making suitable adjustments, investors can benefit by putting their money into commercial real estate.