Why do we invest in real estate… to earn capital gain and/or rental return; talking about commercial real estate in Blue Area Islamabad and Pakistan, the returns/gains are phenomenal.
One may ask, why commercial properties offer better returns than the residential counterpart?
The answer lies in the future potential of the properties that are developed for commercial/business purposes. To make your future investments safe and sound, here’s a quick round-up of why commercial real estate attracts aspiring investors.
So, if you also want to earn higher returns, we would say, invest in a business proposition; your coming generation will be thankful to you.
Before guiding you through the ins and outs of commercial real estate investing in Pakistan, let’s look at the country’s commercial property outlook and the reasons why you should invest.
2022 Commercial real estate trends
The COVID-19 pandemic has brought drastic changes to the real estate industry in Pakistan, and globally, as well. Both commercial and residential investments have suffered setbacks. For commercial assets, the value had declined due to the new norm of WFH and hybrid working models.
According to global real estate dealer and researcher Kathy Feucht, commercial realtors reduced investment by 25% in real estate in 2021.
But Julian Goldie, CEO of Goldie Agency, states that “given the prospect for outsized profits, consistent yields, volatility hedges, and unique tax benefits, more quants are expected to enter the market this year. Tailwinds are blowing across the market as a result of the post-Covid rebound and infrastructure spending, and smart investors should pay attention”.
According to him, the post-Covid 19, era would be different for commercial real estate, and the most-desirable investments would be coming from properties like;
- Hotels
- Offices
- Retail outlets
- Apartments
- Warehouses
- Rental properties
- Commercial development
Basic types of commercial Real Estate Developments
Due to increasing demand for a variety of investment propositions, the scope of commercial properties has evolved. Now, we have more than shops and factories to invest in; one of the golden opportunities to invest in is the shopping malls.
In Pakistan, commercial real estate comprises;
- Retail-Commercial Properties ranging from malls, banks, and restaurants.
- Industrial- warehouses to industrial, manufacturer sites, and marine docks.
- Office- including single tenants to skyscrapers are further categorized as class A, B, and C.
- Special-purpose- for specific uses like self-storage, car washes, and many other industries.
Benefits and Returns of Investing in Commercial Real Estate
Well, it depends, it means not all the commercial properties are worth the shot. Presently, real estate investments in Islamabad, Karachi, Lahore, Quetta are in full swing. There are innumerable advantages for investing in respective neighbourhoods.
Assessing the commercial real estate of Pakistan, these are the reasons why experts recommend commercial properties over residentials ones.
Higher Yield
The average earning is 6 to 12% in commercial real estate investments, this number can go up if the vicinity is well-developed and known for its future prospects. To name some, we have Bahria Towns, Blue Area, DHAs, Gulberg, and others.
Longer Lease
A considerable advantage of investment in commercial real estate is the longevity of the agreements. If you invest in a commercial property and get it rented, then the agreement will last up to 10 years and be better documented with definite laws.
Also, the vacancy risk is lower here than with residential properties, even though the tenant turnover is also minimal.
Intense competition
In commercial real estate, competition is intense; it’s often perceived that projects with commercial propositions are built quickly and are invested by serious investors.
If we look at the master plans of urban cities, there are a large number of real estate builders developing commercial/business towers and high-rises. all of these are following the latest technologies and state-of-the-art facilities.
This is the reason why we have chosen Blue Area, for our latest commercial high-rise business center, Citadel 7. This 20-storey mall + corporate tower offers opportunities in terms of corporate offices, a food court, and retail shops.
It means more and more advanced options for you to invest in commercial real estate in Pakistan.
Relations with tenant
In residential, not only the tenant agreement is smaller, but the mutual understanding between tenant and landlord is dry due to ongoing maintenance issues.
On the other hand, business tenants try to maintain friendly terms due to their long-lasting agreements and since no business owner likes to switch their business location often.
How to start a Commercial Real Estate
These are the factors that might change your scope of real estate in Pakistan;
Location – Here, the rule is simple… if you’re investing in a locality with modern and authorized developments, like Bahria Town, DHA, New Blue Area, Clifton, Gulberg, etc., the chances are that the results will be higher.
Future Prospects – Here comes your previous real estate property knowledge and predictions about the value appreciation/depreciation of the property. You can take help from your realtor friend to judge the importance and future value of the respective property.
Project Completion: The most important thing to consider before investing in real estate, especially in Pakistan, is to look for the project timelines. Often projects here take longer than the set completion dates. Our project, Citadel 7, has definite timelines, and we are promised to get them delivered before the committed date, which is December 2026.
Economic Factors: Before investing in any commercial property in Pakistan, we recommend you consider micro and macroeconomic factors. These include inflation, interest rates, exchange rates, tax policies, and other socio-political factors and economic shocks in the respective city.
The Project’s Credibility: If in Islamabad so, the project should be approved by CDA, likewise for the projects located elsewhere in the country. Approved by legal authorities means your investments are safe and secure.
Don’t be a Victim of Real Estate Scams
Last but not least, be aware of commercial scams and frauds; so, before investing, do the due diligence; visit the property by yourself; double check the documents and their authenticity, etc.
Invest in commercial real estate now and earn higher returns.
