Residential and commercial property both have a place in a real estate portfolio, but commercial assets — shops, offices and commercial plots — work differently. This article, first published in August 2023, sets out five reasons investors were considering commercial property that year, along with the trade-offs.
2023 was a difficult year for Pakistan’s real estate sector amid the wider unrest in the country. At the time, there was market speculation that the government might announce relief measures for the industry. Any such expectation should be treated with caution and checked against current policy.
Stronger rental income potential
A house let to a tenant typically brings in a modest monthly rent. A shop or office in a good location can command noticeably higher rent. Commercial property in a sought-after location is also widely understood to hold value, which can make it easier to find a buyer when you decide to sell.
A wide range of options
Commercial investment is not limited to large buildings. Depending on your capital, you can start with a small shop and build from there.
There are also different strategies to choose from. One approach is to lease a commercial unit at a low rent, make modest improvements and sub-let it at a higher rate — the same tactic works with residential property, but usually with smaller margins.
Longer leases and steadier income
Commercial returns tend to build over time rather than arriving all at once. Businesses usually lease premises for longer periods, so an office or shop can provide a regular income for years.
Residential tenants, by contrast, often stay for only a year or two before their needs change, which means more frequent vacancies and re-letting.
A base for your own business
Many would-be entrepreneurs struggle to find a suitable location. Owning commercial property removes that obstacle: if your unit is well located, you can use it to start your own business rather than spending months searching for premises.
Building your professional reputation
As a commercial landlord, you deal with businesses and corporate tenants. Those relationships can build your network and business-to-business skills, and some owners go on to register their own company in the real estate sector.
The risks to weigh up
- Higher capital requirement. Commercial property is generally far more expensive than residential property, so the entry cost is higher.
- Higher risk. Greater income potential comes with greater risk. Changes in government policy can affect the property market and lead to losses.
Before committing to any project, run through our five features to consider when investing in a housing society.
This article is for general information only and is not financial or legal advice. Prices, approvals and project details change — verify with the developer and relevant authority before making any payment.
- Commercial property
- Rental income
- Investment
- Shops and offices
