Commercial premises – a great investment idea

Above all – a high rate of return

Why do we invest in property? To make money from it. And it is commercial premises that bring the highest annual returns. The yield on properties rented by businesses in Katowice is 7 to 10 per cent – by comparison, for flats to let a return of 5-6 per cent is usually quoted.

A short explanation – the rate of return on an investment (that is, its yield) is the percentage of the value of the property we bought that "comes back" to us within a year. If we invest 2 million PLN in premises intended for retail use, and renting them out brings us 160 thousand PLN in profit in the first year, the rate of return will be 8 per cent.

But why can so much be earned by renting out premises for shops or service businesses? The value of commercial property depends strongly on its location – yes, the same could be said of ordinary flats, but we must remember that a location in the very centre of the city means potentially higher profits from their business for the tenants of retail or service premises. And consequently, the landlord can expect a higher rent from them.

A secure agreement for many years

Many owners of flats to let have to deal with the problem of high tenant turnover. Agreements are most often signed for a year, and housing law puts the security of tenants first (which is of course not surprising – the tenant is the "weaker" party to the agreement). With commercial premises, these problems... simply disappear.

Business owners are happy to sign leases for a period of at least several years – even up to ten! They also rarely terminate them – if the business is profitable and the premises have already been perfectly adapted to the needs of the company, its owners are unlikely to have any reason to leave their office. Unless they need a little more space.

Fitting out the premises? Not a problem

When investing in commercial property, we do not need to worry about finishing or furnishing it. After all, we do not know what kind of business the future tenant will run! So it is enough to hand over our premises in developer's standard (stan deweloperski) – so that the business owner occupying them can freely adapt them to the needs of their company. When letting a flat, this would hardly be an option!

It is worth adding that the tenant of commercial premises will also be responsible for carrying out renovations, repairing faults and replacing equipment – another set of costs that we can forget about.