Real estate is probably one of the most stable types of investment out there in Malaysia. Given that it is carefully managed, you are assured that your money is in great hands. The real estate market is constant and cash flow is regular as long as your properties are occupied.
Although it has its ups and downs in the market, it will definitely come right back up sooner or later. With the way the population grows, there will always be a need for property.
While residential properties are still the most in demand type of real property investment, there is a lucrative business in commercial real estate. The world will never run out of the need for trade and enterprise, and someone somewhere will always need a place to do business.
But should you invest in real estate, how do you know which type of commercial real property would work best for you?
See, there is no ‘one-size-fits-all’ type of property when it comes to Malaysian commercial real estate. It will always be about ‘what floats your boat’. So to help you decide on which type of commercial real estate to invest in, here are the most common types of commercial properties, their advantages, disadvantages, and how to best manage them:
Types of Commercial Properties
- Office Buildings – the known advantage to investing in office buildings is that the leases are generally longer. There is hardly any lease contract on office space that is less than five years. That makes for less frequent vacancies, or huge amount of money for damages on breach of contract. The great thing about most office buildings for lease is that you, as the landlord, could include charges on maintenance and repair. The downside, however, is that it is pretty much a big challenge to find tenants when you are actually vacant.
- Retail Stores – malls and shopping centers belong in this category. This type of commercial property is one of, if not the most profitable. The tenancy rate is high and you could actually charge high on lease and rents for very little space. The location inside the building (i.e. south wing by the entrance, middle, etc) also gives you the chance to charge higher on ‘prime’ locations. However, it is also one of the riskiest. Retail store properties need to consider a lot of things, predominantly location, and require a huge amount of marketing especially in the beginning. Landlords also get to shoulder the costs of repairs and maintenance.
- Warehouses and Other Industrial Locations – of all the commercial spaces in Malaysia (particularly in the Klang Valley), they are easiest to build and maintain. However they are the ones that usually need the most land space to build so they can get pretty costly. On the landlords’ part, there is hardly anything to shoulder other than the building of the property itself. The rest – maintenance, modification, repair – is left for the tenant to shoulder since they would likely modify the whole area to accommodate their specific industrial needs. The lease is long and pretty expensive, but like office spaces, vacancies can be a challenge.
Finally, it is also interesting to see that high net worth individuals are seen to be actively going into commercial real estate. This has been covered recently in The Edge magazine and the GoodPlace blog here and here respectively.