Commercial property investing

Commercial Property Investment in Australia How to invest in commercial property, and which commercial properties actually work

What a commercial lease is really worth, how the yield you were quoted differs from the yield you receive, and the three catches that decide whether the deal works.

The short answer

Commercial property investment in Australia means buying premises a business leases, such as a warehouse, shop, office or medical suite. The tenant usually pays the outgoings, so net yields are higher than residential. The risk is vacancy: when a commercial tenant leaves, the income stops rather than dips.

Commercial property investment in Australia means buying premises that a business leases and trades from. A warehouse. A shop. An office suite. Medical rooms. A childcare centre. You own the building. The tenant runs a business inside it, and under most commercial leases the tenant pays the outgoings a residential landlord would absorb.

That is where the higher net yield comes from. It is also where the risk sits. When a residential tenant leaves, your income dips for a few weeks. When a commercial tenant leaves, your income does not dip. It stops, and the outgoings keep running.

So the honest answer to "is commercial property a good investment in Australia" is this. It is a good investment when the lease is good, the tenant is solid and you can fund a long vacancy without selling. It is a poor investment when you bought the yield and skipped the lease.

I write this as someone who has bought 22 residential properties with my own money over 15 years, and whose next purchase is commercial. Where this guide describes what to check on a real deal, that is the six-part due-diligence frame I run on every commercial brief we take.

Three people usually arrive on this page

You are probably one of them, and which one you are changes what matters below.

One

You own a business and pay rent

Every month you write a cheque to a landlord for premises your business cannot operate without. You have wondered whether you could own them instead. You can, and the exception that allows it is stricter than you have been told. Start at the super section.

Two

Your residential borrowing has stalled

Two or three properties in, the bank has stopped saying yes, and the next purchase will not service. Commercial is often suggested at this point as the way through. Sometimes it is. It also carries a vacancy risk residential never asked you to hold, and the deposit is larger, not smaller.

Three

Your SMSF plan just broke

You were going to borrow inside super to buy a residential investment property. From 10 August 2026 that is no longer possible, and commercial is the only property a fund can still borrow for. You did not choose commercial. It is what is left, which is a reason to be more careful, not less.

If none of those is you, the honest answer is that commercial may not be the question you should be asking yet. There is a section near the end on who this genuinely does not suit, and it is worth reading before the rest.

Fast facts on the Australian commercial property market

Sourced figures, with the as-at date on each

  • Melbourne CBD office vacancy sat at 18.9% in the six months to July 2026, easing from 19.0%. It is the highest CBD office vacancy in the country. (Source: Property Council of Australia Office Market Report, as at July 2026.)
  • Sydney CBD office vacancy was 13.3% and Brisbane 10.2% over the same period. (Source: Property Council of Australia Office Market Report, as at July 2026.)
  • Victorian office transactions have fallen more than 62% since the start of 2024, from a decade-long average of $3.4 billion a year to $1.28 billion a year. (Source: JLL research, as reported by the Property Council of Australia, July 2026.)
  • Foreign direct investment in Victorian offices has stopped, at least for now. No foreign buyers were recorded in the six months to June 2026, down from 47% of transactions over the decade to December 2023. (Source: JLL research, as reported by the Property Council of Australia, July 2026.)
  • Rent on commercial property attracts GST if you are registered or required to be registered. You can also claim GST credits on the purchase if the property is used in your GST-registered business. (Source: Australian Taxation Office, "Commercial property", last updated 15 December 2022.)

Read those numbers the way a landlord would. An 18.9% vacancy rate is not an abstraction. It is close to one floor in five sitting empty, every square metre of that space still costing its owner money each month.

That is also the honest case for considering investing here at all. Prices reset before sentiment does. The opportunity to invest is usually loudest when the headlines are worst, provided you are buying a quality investment on a lease you have actually read.

CBD office vacancy rates, six months to July 2026 Melbourne 18.9 per cent, Sydney 13.3 per cent, Brisbane 10.2 per cent. Source: Property Council of Australia Office Market Report, July 2026. CBD office vacancy, six months to July 2026 Melbourne 18.9% Sydney 13.3% Brisbane 10.2% Source: Property Council of Australia Office Market Report, as at July 2026. Bars scaled against a 20% axis maximum.
CBD office vacancy across Australia, six months to July 2026. Figures as cited in the fast facts above.

What is commercial property investment in Australia

Commercial real estate is any property leased to a business rather than to a household. Renting a shop to a butcher and renting a house to a family are both real estate investing, but they are governed by different legislation, priced on different logic and sold to different buyers.

The core difference is what you actually own. In residential you own a dwelling and the land under it. In commercial you own an income stream, secured by a building. Some of what you buy is not even freehold: a leasehold estate over a site inside a centre or an airport precinct is a real form of ownership with an end date attached.

Everything that follows is downstream of that one idea. The basics of commercial property investment are not really about buildings at all. They are about contracts, and about who is obliged to pay you what, for how long.

What types of commercial properties can you invest in

In practice, Australian private investors buy five kinds of commercial properties.

Industrial properties. Warehouses, workshops, distribution centres and small factory units. The building is simple, the fit-out is the tenant's problem, and the tenant usually needs the location more than it needs the shed.

Retail property. Shops, showrooms, strip retail and neighbourhood shopping centres. A retail asset lives or dies on foot traffic and on the trading health of the occupier.

Office property. Suites and small floors. The most exposed of the five right now, for reasons the vacancy numbers above make obvious.

Medical. Consulting rooms, dental and allied health. Expensive fit-outs make tenants slow to move.

Childcare. A purpose-built modern building on a long lease with fixed annual increases, leased to an operator rather than to the family who uses it.

Each type has its own market dynamics. Industrial follows freight and infrastructure. Retail follows household spending. Office follows employment and, right now, working patterns. Medical and childcare follow population and regulation more than they follow the economic cycle, which is why they trade on lower yields than the risk alone would suggest.

The word "commercial" also covers things you do not buy directly. Listed property trusts, or A-REITs, are commercial real estate listed on the Australian Securities Exchange. Unlisted investment trusts and managed funds hold the same asset class without a stock exchange listing. Those are covered further down, because "invest in commercial property" and "buy a commercial building" are not the same decision.

Is commercial property a good investment in Australia

It depends on three things, in this order.

One. The lease. The lease is the asset. The building is the security behind it. A five-year term with two five-year options and fixed annual increases of 3% is a different investment from a two-year term with a market review, even if the two buildings are identical and the price is the same.

Two. The tenant. Rental yields are only as good as the business paying them. A national franchise with a parent-company guarantee and a listed operator with published accounts are not the same covenant as a sole trader in their second year. Your rent is paid out of somebody else's profit, so the health of their trade is the health of your income.

Three. Your capacity to fund a vacancy. This is the one investors skip. If the property sits empty for nine months, does anything in your life break? If the answer is yes, the deal is too big regardless of the yield.

Get those three right and commercial property investment does something residential rarely does. It produces genuine net cash flow while you hold it, because quality tenants pay the council rates, insurance, land tax in most states and building maintenance. Get them wrong and you own an empty building with a bill attached.

Is commercial property a good investment in 2026

The market is not one market. Industrial properties and medical assets are trading on much thinner yields than office because occupier demand is stronger and vacancy is shorter. Office is repricing, and the vacancy figures above show why. Retail depends entirely on the strip and the tenant.

Anyone who tells you "commercial is a good buy right now" without naming the asset class, the city and the lease is selling something. The correct question is never "is commercial good". It is "is this lease, on this building, at this price, good".

How does commercial investment differ from residential investment

Investors coming from residential properties expect commercial properties to be the same game with bigger numbers. It is not. Six things change.

  Residential investment Commercial investment
Who pays outgoingsYou doThe tenant does, under most leases
Typical vacancyWeeksMonths, sometimes quarters
Lease terms6 to 12 months3 to 10 years, often with options
Rent reviewsMarket, at renewalOften fixed annual rental increases written into the lease
What the valuer looks atComparable salesThe lease and the income it produces
Buyer pool on exitVery deepNarrower, and it shrinks as the lease runs down

The last two rows are the ones that catch people. In residential, your property is worth what the house next door sold for. In commercial, your property is worth what its income stream is worth to the next buyer, and that income stream has an expiry date printed on it.

Should you hold commercial and residential properties together

Usually, yes, and in that order. A balanced investment portfolio can hold residential and commercial together, and many do. They fail in different conditions, which is the point of holding both.

Residential investment is a capital growth engine with weak cash flow. Commercial investment is a cash flow engine with less reliable capital growth. Neither is better. They do different jobs.

The sequencing matters more than the split. Residential properties are easier to finance, easier to sell and forgiving of a mistake. Commercial property investments are the opposite on all three counts, and they concentrate your risk into a single tenant. Most investors are better served building the residential base first, then adding commercial once there is enough equity and enough income that one vacancy is an inconvenience rather than an emergency.

That is the part of the investment journey people want to skip, usually because commercial promises a higher rental return today. It does. It also asks for a bigger cheque, a longer wait and a colder head.

One more thing worth saying plainly. Vacancy rates in commercial are not a market statistic you read about. They are a personal statistic. With one property and one tenant, your vacancy rate is either 0% or 100%.

How much money do you need to invest in commercial property in Australia

There is no single minimum deposit, but there are three real constraints.

Deposit. Commercial lending is more conservative than residential lending. Lenders generally want a materially larger deposit than the 10% or 20% a residential investor is used to, and the exact figure moves with the asset class, the lease and the borrower. Get a written indication from a commercial mortgage broker before you shortlist anything.

Purchase costs. Stamp duty, legal fees, a building and pest inspection, a valuation, an environmental report on some industrial sites, and often a survey. Budget for these before you fall in love with a listing.

The vacancy reserve. This is the number nobody quotes. Work out twelve months of loan repayments plus twelve months of outgoings for that specific building. If you cannot set that aside, you cannot afford that building. It is not pessimism. It is the arithmetic of an asset where the income can go to zero for a year.

The practical entry point for most investors buying commercial properties directly is a small industrial unit or a single retail tenancy. Above that, syndicates, unlisted property trusts and listed investments give you exposure to high quality commercial properties you could not buy alone.

How to measure returns and capital growth on commercial property investments

Three numbers, and only one of them matters.

Gross yield is annual rent divided by purchase price. It is the number in the advertisement. It tells you almost nothing.

Net yield is annual rent, minus every cost the tenant does not pay, divided by the total purchase price including stamp duty and acquisition costs. This is the honest number.

Total return is net yield plus capital appreciation over the hold, after any capital gains tax on the way out. Capital growth over the long term in commercial property investments is driven by rental growth, not by scarcity of land the way it is in residential.

Gross is a story. Net is the truth.

That last point is worth sitting with. In residential, a well-maintained house in a good street grows because the land under it becomes scarcer. In commercial, the building is a depreciating box on a serviceable site. If the rent does not grow, the value does not grow. So the questions that drive capital growth are all rent questions: can this tenant afford a higher rent, does the lease allow you to charge it, and would a new occupier pay it.

Then check the cash flow month by month, not annually. Commercial outgoings arrive in lumps. Land tax lands once. Insurance lands once. A roof does not fail evenly across twelve months.

A worked example, with the numbers shown

Take a small industrial unit advertised at a 7.0% yield. Here is what happens to that number once you purchase a property properly.

Line Amount Where it comes from
Purchase price$1,500,000Contract
Acquisition costs$85,000Stamp duty, legal, inspections, valuation
Total outlay$1,585,000What actually leaves your account
Face rent$105,000 a yearThe rent written on the lease
Advertised gross yield7.00%$105,000 divided by $1,500,000
Incentive6 months rent freeOver a 5-year term, so 10% of the income
Effective rent$94,500 a year$105,000 less the incentive
Actual net yield5.96%$94,500 divided by $1,585,000

The headline said 7.00%. The truth is 5.96%. That gap of 1.04 percentage points is about 15% of the return you thought you were buying, and nothing about the building changed. Only the arithmetic did.

Now add one vacancy. Suppose the tenant leaves in year three and the unit sits empty for six months. You lose roughly $47,250 of rent and pick up about $9,000 of outgoings you were not paying before. That is $56,250, which is close to 12% of the entire five-year rent roll, from a single six-month gap.

Every figure above is arithmetic on the assumptions shown, not a market forecast. Change the incentive, the costs or the vacancy and the answer changes. Run it on your own deal before you sign anything.

What is the 2% rule for properties

The 2% rule is an American rule of thumb. It says monthly rent should equal 2% of the purchase price. It does not work in Australia and it never has.

Run it. On a $1.5 million property, 2% a month is $30,000 a month, which is $360,000 a year. That is a 24% gross yield. Nothing in the Australian commercial market trades at anything close to that, and if something did, the reason would be a problem you have not found yet.

Use net yield against your actual cost of debt instead. If the net yield does not clear your interest rate by a sensible margin, the deal only works if rents grow. That is a forecast, not a fact.

The three catches nobody mentions in commercial property investing

Commercial properties fail in three predictable ways. These are the three that turn a good-looking deal into a bad one, and none of them appear in a listing.

Vacancy is not a gap, it is a hole

A residential vacancy costs you two or three weeks of rent. A commercial vacancy costs you the rent, plus the outgoings you now pay yourself, plus the letting fee, plus the incentive you will have to offer the next tenant to sign.

Put a shape on that. A residential vacancy is a bad month. A commercial vacancy is a bad year, and it arrives with the bills the tenant used to pay. Rates, insurance, land tax and maintenance do not pause because the building is empty - they move from the tenant's column to yours on the day the keys come back. So the month your income goes to zero is also the month your holding cost goes up. That is the sentence to sit with before you look at a single listing, because it is the one that decides whether you can own this asset class at all. Finding tenants for a specific building takes as long as it takes. There is no market rent that clears a warehouse in a suburb with no demand. When the Property Council reports Melbourne CBD office vacancy at 18.9% as at July 2026, that is what it looks like from the inside: buildings that are priced to lease and still are not leasing.

The yield you were quoted is a face rent yield

Commercial leases are commonly signed with incentives. A rent-free period. A contribution to the fit-out. Sometimes both. The rent written on the lease, the face rent, is higher than the rent the tenant effectively pays across the term.

A yield calculated on face rent flatters the deal. Ask for the incentive, in writing, and recalculate on effective rent. If the agent will not put the incentive in writing, that is your answer.

The bank revalues the lease, not the building

In residential, your valuation follows the market. In commercial, it follows the income, and the income has a clock on it.

A property with seven years left on its lease and a property with eighteen months left can be physically identical and value very differently. So as your lease runs down, your valuation can fall while the market does nothing at all. If your loan has to be refinanced in the same window, you are refinancing a shrinking asset.

The industry measure for this is WALE, the weighted average lease expiry. On a multi-tenanted building it is the average time left across all the leases, weighted by income. A long WALE means certain income and a deep buyer pool. A short WALE means the next owner inherits your re-letting problem, and prices accordingly.

Plan the refinance around the lease expiry date, not around the interest rate cycle. That single habit prevents more damage than any market timing ever will.

What a commercial valuation actually prices Residential property is valued from comparable sales of similar buildings. Commercial property is valued from the income the lease produces. You are buying a building. The valuer is pricing a lease. RESIDENTIAL Valued from comparable sales What did similar buildings nearby sell for. The tenant is almost irrelevant to the number. COMMERCIAL Valued from the income What does the lease pay, and how safe is it. The tenant is most of the number. HOW THE NUMBER IS BUILT Net annual income ÷ capitalisation rate = value Rent minus what you cannot recover. Four things move that number WALE Weighted average lease expiry. Longer income certainty, tighter cap rate. Covenant Who actually pays, and what happens if they stop. A name is not a rating. Outgoings Recovered from the tenant, or worn by you. This is the gap between gross and net. Incentives Rent-free periods and fit-out contributions. They separate face rent from effective rent. The building still matters, but mainly through how easily it re-lets when the lease ends. A good building on a bad lease prices as a bad asset, and the day the tenant leaves you own a vacancy measured in months, not weeks.
A good building on a bad lease prices as a bad asset. That is the whole difference from residential, and it is why the lease is the first document to read, not the last.

Get the commercial due diligence checklist

How a commercial valuation follows the lease, not the market Two identical buildings. The one with seven years left on its lease values higher than the one with eighteen months left, even though the market has not moved. Same building. Different lease. Different valuation. 7 years left on the lease Income certain for 7 years Deep buyer pool Bank lends against the term Valuation: strong 18 months left on the lease Re-letting risk at expiry Narrower buyer pool Refinance lands on the gap Valuation: discounted Illustrative. The market has not moved in either case. Only the remaining lease term has.
Commercial value follows the lease, not the building: the same premises price differently on different lease terms.

What to check in a commercial lease before you buy

Due diligence on commercial properties is document work. The building inspection is the easy part. The risk lives in the paperwork.

Lease terms. Start date, expiry date, options, who holds them and how they are exercised. A five-year term with two five-year options is fifteen years of income only if the tenant wants it to be. Options belong to the tenant, not to you.

Rent reviews. Fixed annual increases, CPI, market, or a mix. A market review at the wrong point in a cycle can reset your income downward.

Outgoings. Which ones the tenant pays, which ones you carry, and whether the lease is net or gross. Council rates, land tax, insurance, strata levies and building maintenance are the usual list, and the treatment differs by state and by lease type.

The tenant covenant. Who is actually on the lease. A shelf company with no assets is not a covenant. Quality tenants come with something behind them, so ask for a director's guarantee or a parent-company guarantee, and ask for the bank guarantee or security deposit amount.

Zoning and planning. What the property may legally be used for, and whether the current use is approved. Planning legislation differs by state and by council, and a retail asset trading under an unapproved use is a problem you inherit at settlement along with the ownership.

The exit. Who buys this building in five years, and what has to be true about the lease for them to pay a fair price.

That is the six-part frame we work through on every commercial brief. The full question list is in the commercial due diligence checklist, and the broader method sits inside our property due diligence guides.

Due Diligence Checklist Lease term and options Rent review structure Tenant trading history Recoverable outgoings Essential services Zoning and permitted use Make-good obligations Exit and resale market 6 pages · 42 questions · print friendly FREE

Do not inspect a commercial property without this

Six sections. Every question we ask about the lease, the tenant, the outgoings, the building, the zoning and the exit, in the order we ask them. The questions that cost nothing to ask and a fortune to skip.

No fluff, just the questions.

FREE COMMERCIAL DUE DILIGENCE CHECKLIST

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How commercial property lending works in Australia

Commercial lending is a different product, not a bigger version of a home loan. Four practical differences.

The loan term is shorter. Commercial facilities are commonly written for a set term and reviewed, rather than left to run for thirty years. That review is a decision point, and it is the lender's decision.

The lender looks at the lease. Serviceability is assessed on the rental income the lease produces and on the strength of the tenant, alongside your own position.

The deposit is larger. Expect to contribute materially more equity than a residential purchase of the same price.

Rates and fees are negotiated, not published. There is no comparison table. A commercial mortgage broker earns their fee here.

Do not use residential thinking to size a commercial loan. And do not let a lender's approval substitute for your own vacancy reserve. The bank is underwriting the lease. You are underwriting the day the lease ends.

Confirm all current commercial lending parameters with a licensed credit adviser before relying on them. This is general information, not credit advice.

Can a self-managed super fund buy commercial property

Changed 10 August 2026

Commercial property is now the only property a self-managed super fund can borrow to buy. From 10 August 2026 a limited recourse borrowing arrangement can no longer be used to acquire residential investment property. What still meets the test is business real property: real property used wholly and exclusively in one or more businesses. Most commercial property qualifies; vacant or mixed-use premises may not, because the test turns on use rather than zoning.

That is a narrowing of the field, not a widening, and it deserves to be said plainly: nothing about commercial property became better on 10 August. What changed is that the geared alternative inside super was removed. If borrowing inside a fund is part of your plan, commercial is now the only way that plan works - which makes getting the property right more consequential, not less.

Our page on the SMSF borrowing changes covers what moved, and our guide to buying property with super sets out how a fund holds property.

This is one of the most common reasons Australian business owners look at commercial property investment, and it is also where the rules are strictest.

The Australian Taxation Office is explicit that an SMSF generally must not acquire assets from members or related parties. There are exceptions, and the ATO lists them. Where an exception applies, the price must reflect market value, and the asset must be one of the following:

  • a listed security, for example shares, units or bonds listed on an approved stock exchange
  • an in-house asset, where the acquisition does not push in-house assets above 5% of total assets
  • an asset that would be an in-house asset but is specifically excluded from being one
  • business real property acquired at market value - this is the exception that matters most here, and it is the one that lets a business owner hold their own premises in an SMSF and lease them back at arm's length.

(Source: Australian Taxation Office, "What are the SMSF investment restrictions?")

The ATO also requires that any such transaction is conducted on a commercial arm's length basis, and warns that where an asset is not acquired or sold at arm's length, income from the transaction may be taxed at the highest marginal rate.

The arrangement business owners usually have in mind sits inside that third bullet, which is why an accountant who does self-managed super fund work has to sign off on the structure before you make an offer, not after. Get it wrong and the fund can be made non-complying.

Our guide to buying property through super walks through how self-managed super funds hold property and where the traps are.

Commercial investment through property trusts and managed funds

Direct property is not the only way in, and for a lot of investors it is not the right one.

A-REITs. Australian real estate investment trusts are listed on the ASX. Investing in A-REITs gives you exposure to large commercial properties, daily liquidity and professional property management, and you give up control. Prices move with the share market as well as with property.

Unlisted property trusts and managed funds. These hold direct property without a listing. Less price volatility, far less liquidity. Your money is often locked for a set term. Read the product disclosure statement before you read the brochure.

Syndicates. A group of investors buys one asset together. Concentrated, and the exit depends on the other investors.

The trade-off is simple. Buying direct gives you control over the lease, the tenant and the timing, and it gives you depreciation and gearing in your own name. Listed property and unlisted investments give you diversification across many buildings and none of the work.

If your goal is a diverse portfolio and a quiet life, listed investments do the job. If your goal is to control an asset and improve it, buy the building. Deciding which of those you actually want is the step most people skip.

This is general information about asset classes, not personal financial advice. Speak to a licensed financial adviser about your own financial goals and circumstances.

How do you buy a commercial property in Australia

Six steps, in order.

  1. Set the brief. Asset class, price range, target net yield, minimum lease term, states you will and will not buy in, and the vacancy reserve you can genuinely fund.
  2. Search on the lease, not the postcode. In residential you find a suburb then a house. In commercial you find an income stream then check where it lives.
  3. Get the documents early. Lease, outgoings statements, rent roll, plans, certificate of title and any planning approvals. Before you negotiate, not after.
  4. Price it on effective rent. Recalculate the yield net of incentives and net of the outgoings you actually carry.
  5. Negotiate the contract conditions, not just the price. Due diligence period, finance clause, and whether the sale is structured as a going concern.
  6. Settle and hand over to management. A commercial property manager is not optional. Lease administration, rent reviews and outgoings reconciliation are specialist work.

On step 5, a note worth having. The ATO treats a fully tenanted building as capable of being sold GST-free, as the supply of a going concern. Four things must be true. All leases, agreements and covenants are included in the sale. The sale is for payment. The purchaser is registered, or required to be registered, for GST. And both parties agree in writing. The ATO is equally clear that "the sale of a property by itself isn't regarded as a going concern". (Source: Australian Taxation Office, "Selling a going concern", last updated 15 December 2022.)

If you want that process run for you, our commercial property buyers agent page sets out how we run a brief end to end, and what the flat fee is before you start.

Who commercial property investment suits, and who it does not

This is for you if

  • You already own residential properties and want net cash flow to balance them
  • You can fund twelve months of vacancy without changing how you live
  • You are comfortable making a decision from documents rather than from a walkthrough
  • You are buying for income first and capital appreciation second
  • You are a business owner who could occupy or part-occupy the premises

This is not for you if

  • This is your first investment property
  • The deposit is every dollar you have
  • You need to be able to sell quickly
  • You are buying because the yield is higher than residential and you have not read a lease yet

Higher yields on commercial property investments are compensation for risk, not a free upgrade. That is the whole trade.

If you are still building the residential base, sequencing the portfolio matters more than adding an asset class. And if you are weighing whether to use a buyer's agent at all, what a buyer's agent actually does and what a buyer's agent costs are the two pages to read first.

Questions

Commercial property investment FAQ

Is commercial property a good investment in Australia?

It can be, when the lease is long, the tenant is strong and you can fund a long vacancy without selling. Commercial property produces higher net yields than residential because the tenant usually pays the outgoings. It carries longer vacancy risk, and the income can stop entirely rather than dip. The quality of the lease matters more than the quality of the building.

How much money do you need to invest in commercial property in Australia?

There is no fixed minimum. Commercial lenders require a materially larger deposit than residential lenders, and you also need purchase costs and a vacancy reserve. A useful test is whether you can set aside twelve months of loan repayments plus twelve months of outgoings for that specific building. If you cannot, the property is too big for you.

What is the 2% rule for properties?

The 2% rule is an American guideline suggesting monthly rent should equal 2% of the purchase price. It does not apply in Australia. On a $1.5 million property it would require $30,000 a month, or a 24% gross yield, which no Australian commercial asset produces. Use net yield measured against your actual cost of debt instead.

What are the advantages and disadvantages of commercial property compared with residential property?

The advantages are higher yields net of costs, longer lease terms, fixed annual rental increases written into many leases, and a tenant who pays the outgoings. The disadvantages are longer vacancies, a narrower buyer pool on exit, more conservative lending, and a valuation that follows the lease rather than the market. Residential investment is a capital growth engine with weak cash flow. Commercial investment is a cash flow engine with less reliable capital growth.

What types of commercial properties can you invest in?

Australian private investors most commonly buy industrial properties such as warehouses and distribution centres, retail property such as shops and strip retail, office property, medical rooms, and childcare centres. You can also gain exposure without buying a building through listed A-REITs, unlisted property trusts, managed funds and syndicates.

How is the return on a commercial property investment measured?

Gross yield is annual rent divided by purchase price and is the number quoted in advertisements. Net yield is annual rent minus every cost the tenant does not pay, divided by the total purchase price including stamp duty and acquisition costs. Total return is net yield plus capital growth over the hold period. Net yield is the number to make decisions on.

Can a self-managed super fund buy commercial property?

The ATO states that an SMSF generally must not acquire assets from members or related parties. Limited exceptions apply where the price reflects market value. The asset must then be a listed security, an in-house asset within the 5% cap, or an asset specifically excluded from being an in-house asset. All transactions must be on a commercial arm's length basis. Have an accountant who does SMSF work confirm the structure before you make an offer.

Is commercial property a good investment in 2026?

There is no single answer, because commercial is not one market. Industrial and medical assets are trading on tighter yields because occupier demand is stronger and vacancy is shorter. Office is repricing, with Melbourne CBD vacancy at 18.9% and Sydney at 13.3% in the six months to July 2026 according to the Property Council of Australia. Judge the individual lease, tenant and price rather than the asset class as a whole.

What are the main economic risks of commercial property investment?

The main risks are tenant default, extended vacancy, rent reviews that reset income downward, interest rate movements against a shorter loan term, and a valuation that falls as the lease runs down even when the market has not moved. Economic cycles hit commercial tenants before they hit household budgets, so commercial income tends to weaken earlier in a downturn than residential income does.

Where to go next

If you are working through a specific building, start with the commercial due diligence checklist. It is the six-section question list, free, email only.

If you want a brief run properly, the commercial property buyers agent page explains the process and the fee. We take commercial briefs nationally, led by Rasti Vaibhav, CFA Charterholder and Founder of Get RARE Properties, under the firm's NSW, VIC and QLD licences. Client fees are our only income.

If you are not sure whether you should invest in commercial property at all, that is a conversation, not a purchase.

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About the author

Rasti Vaibhav

Rasti Vaibhav, Founder of Get RARE Properties

Rasti Vaibhav is a CFA Charterholder and the founder of Get RARE Properties. After more than 9 years managing institutional portfolios at Westpac and AMP Capital, he has spent 14 years investing in property personally and now holds 22 properties worth about $16.8 million. Get RARE has helped 550+ client families purchase more than $300 million of property and add more than $80 million in value. He is the author of The Property Wealth Blueprint.

Get RARE Properties is licensed in NSW, VIC and QLD, and is a member of PIPA, REINSW, REIV, REIQ and REIA. 2025 REINSW John Greig OAM Community Award winner. Finalist, 2026 REINSW Buyers Agency of the Year. Finalist, 2026 REINSW Buyers Agent of the Year. Finalist, 2026 REINSW John Greig OAM Community Award. Finalist, 2025 REB Thought Leader of the Year. Finalist, 2025 REB Innovation in Buyer's Agency.

Disclaimer. This article is general information only. It does not take account of your objectives, financial situation or needs, and it is not financial, credit, tax or legal advice. Figures and market data carry the source and date shown. Speak to a licensed financial adviser, credit adviser, accountant and solicitor before acting.

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PIPA Member REINSW REIV REIQ REIA Licensed in NSW, VIC & QLD CFA Charterholder-led 550+ client families $300M+ of property purchased 70–90% bought off-market
Sydney — Suite 5.03, 309 George Street, Sydney NSW 2000 Melbourne — Ground Floor, 161 Collins Street, Melbourne VIC 3000 Phone02 5022 5450 · Mon–Fri, 9am–5pm LinkedIn YouTube Facebook Instagram
© 2026 by Get RARE Properties
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