Commercial Property Investment: How It Differs from Residential

Commercial property often offers higher yields and longer leases than residential, but the risk profile and financing requirements are materially different.

Lease structure is the asset

In commercial property, the lease largely determines value. Length, tenant covenant strength, rent review terms, and who bears repair obligations matter as much as the building itself.

Financing is stricter

Lenders typically require larger deposits and assess the debt service coverage ratio closely. Expect more scrutiny of income quality than in residential lending.

Vacancy risk is concentrated

• One tenant leaving can take income to zero
• Re-letting periods are often measured in months, not weeks
• Fit-out costs for new tenants can be substantial