…Some want it to happen, some wish it would happen… but others make it happen…
ZUVO Commercial is a licensed professional Buyer’s Agent that specialises in the sourcing of commercial property specific to our client’s individual goals and needs.
We assist with researching, sourcing, evaluating, and negotiating the purchase of commercial real estate for the buyer.
The key benefits of using our services are:
Finding the right commercial investment and then performing the detailed and thorough due diligence is very time consuming. This is where we can save you a lot of time and stress. We do all the on-the-ground leg work for you from start to finish.
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Due diligence, evaluating, research…
What exactly does this all mean and what is involved?
With every commercial property purchase we try and minimise risk as much as possible, for the maximum available return on the asset. Below are some of the key factors that we look into thouroughly prior to every purchase for our clients.
Due diligence & market research
Understanding the market and the tenant is the key to success in commercial property. We live for commercial property and are reasearching on what the market is doing every single day.
We research everything from a big picture perspective (economy projections and changes, interest rate effects on market segments, vacancy rates) all the way to talking to tenants & vendors, walking around business/retail and industrial precincts, talking to agents, developers & property managers to check on rents, square metre values, different asset type capitilisation rates within different suburbs and finding out whats on the horizon in various communities and regions.
We investigate the health of the business sector you expect your tenant to come from and deep dive into changes to infrastructure that local and state authorities are planning for the area.
Always invest in prime positions
We aim to always invest in prime retail, commercial or industrial locations i.e. commercial property that is in high demand positions that are popular with tenants in busy business hubs. One key characteristic to a prime position is visibility and accessibility to public transport and parking.
Re-letability
Lets face it, when you hold a commercial property asset long enough, at some point in time you will have a vacancy. The key to reducing the vacancy period is to have a good asset that appeals to more than one industry/business type to start with. This is why some special purpose asset types (eg service station) whilst may have a long lease with an excellent return can be a great investment for the term of the existing lease, but what do you do if the tenant doesn’t re-sign at the end of the 10 or 15 year lease term?
Purchase a leased property
Nine out of ten purchases that we do all have a tenant in place. It is the only way to mitigating the risk of your investment. The purchase price is higher in comparison to a vacant premises but well worth it to “hit the ground running”.
The ideal purchase is buying a commercial property that is leased to a good tenant on a long lease… for an undervalued price.
Research tenant calibre and lease term
As the value of your commercial investment will depend upon your rental return, a strong tenant on a long lease (minimum 3-5+ years) will underpin a great investment.
We always check the rental per square metre value and ensure that the rate is not inflated compared to market rentals nearby for similar assets. For example, if the rental on a lease is $300 per square metre of a property you are looking to buy, and the market rental is $400 per square metre, then there is a 25% upside potential to add-value at your next rent review with the tenant.
If the current rent is above market rental, you may be overpaying for the commercial property to start with and you will have little upside potential for rent reviews and therefore future increased capital values.
Lease Structure
Another key due diligence component that must be done is thorough auditing of the existing lease in place. Without spending the time and effort to do this step properly is a recipe for disaster. Things to consider includes the length of the lease, the frequency and methods of rent review, and who pays the operating costs, gross vs net leases. Digging into these operating costs sometimes can be very difficult, but that’s what we do.
The ideal scenario is to have a long lease with regular rent reviews to market with a minimum of CPI increase and a tenant who pays all the outgoings.
Recent construction
Newer properties are a good asset, with additional tax benefits but you still need to keep the purchasing fundamentals in mind. Generally recently built properties will have ongoing appeal to tenants and require a lot less renovation, with higher ongoing depreciation benefits.
Flexible Design
We always look for an efficient floor layout so that if you ever in the future want to sublease or re-lease the space, you’re able to easily. Especially for industrial property this means buildings where the proportion of office space can easily be varied is a big plus.
However, many investors are swayed by flashy fit-outs and impressive improvements, but these features can sometimes disguise poor capital growth in substandard locations. So never lose site of one of the most basic property investing principles – it’s land that appreciates in value and the buildings (or improvements), that depreciate.
Invest in properties with development/add-value potential
We look for undercapitalised properties, for example where the existing tenants are paying below market rent or properties that are underdeveloped where you can add instant value but doing basic upgrades like carpet, paint & signage (all for a relatively low cost).
