Is commercial real estate a profitable investment?

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Residential properties are manifold. And those looking for a safe investment have chosen to diversify their investment portfolio by also considering commercial real estate products. What are the opportunities on the Mauritian market and is commercial real estate a good choice? We have sought 3 professionals’ advice.

Commercial properties: Make a choice

Three of our partners have answered the following questions to have a better insight into the matter:

1. Is commercial real estate a good investment opportunity in 2019?
2. What are the products and the investors’ profiles?
3. Which regions are better suited for this type of investment?

DISCOVER THEIR ASSESSMENT>>

Melissa Henri - Area Sales Executive, Offissimmo

More and more clients are seizing the opportunity to invest in commercial real estate, specially by purchasing offices.The major asset, here, is that these products have a higher ROI than more ’traditional’ developments, with an average rate between 7 and 10%.

We offer offices spaces, which are often already rented, to our local and foreign clients who want to diversify their investment. We have also seen that new property projects are favoured as investors can, thus, buy spaces at preferential prices and then schedule the installments as the construction works progress.

Our clients mostly opt for the most attractive regions, such as Moka, Ebene or Grand-Bay. But they, however, still envision other opportunities in town centres, which remain reliable investments in the office segment.

Pascal Rochecouste - Directeur, Habitat Immobilier

While, some years back, real estate investment was focused on residential products, investing in commercial property is becoming more common. Acquiring commercial premises for rent is an excellent opportunity with rental returns which often exceed those from residential products. Commercial real estate is perfectly suitable to long-term rentals, with tenants who must make their investment profitable following works done. For the owner, maintenance and management involve less hassle, and there is less overdue risk.

There is a large variety of products from different segments: commercial premises (shops, restaurants, etc.); offices (finance, IT, offshore, etc.); industrial and logistics premises (production, warehouse, factory, garage, etc.), and service properties (hotels, clinic, entertainment, etc.). Investors are generally stable ones (engaged or married, executive, top executive or house owner). They prefer to invest in properties instead of bank saving accounts to benefit from a better ROI and a capital gain in case of resale. They are looking for financial products with the possibility to create a property portfolio bringing complementary revenues when they retire.

Location is the most important criterion: a high-activity place, with good exposure and access to roads networks - like shopping streets in town centres, pedestrian streets or in close vicinity to a supermarket, a bus station or other crowd-pullers. These prime sites offer better security and the tenants usually have a secured turnover.

Peter LLewellyn - Director, Pam Golding

Dorinne Rousseau | Peter Llewellyn | Nicole Wannenburg

Since 2004, when the building boom started in Mauritius, we have seen a lot of local and foreign residential units coming onto the market. In parallel, commercial buildings including new builds (office buildings, retail space and warehouses/industrial units) have also become more in demand. This has fuelled phenomenal growth, fed by purchasing and rental needs. It is not uncommon to achieve up to 11% rental yields, especially on office acquisitions. With lower maintenance costs, they offer a profitable opportunity with stable income and ongoing cash flows.

We see perhaps more investments going into office space than other categories (for purpose of buy-to-let). Many invest into complete floors of new, off-plan office projects. They can be passive investors who simply buy to add to a property portfolio, or those who acquire one or more smaller office spaces, perhaps in different developments. These investors are the low risk ones who are more sensitive to a constant cash flow derived from their rent. Investors (offices, retail, industrial buildings, warehouses and commercial land) are usually in their mid-40’s and upwards.

Choosing the right location is critical for successful investing and to ensure highest yields. In terms of location and for office premises, the high demand areas would be Ébène, Moka, Phoenix, Grand Bay, Tamarin and Port Louis. Buying off plan tends to be a safe bet with a higher initial capital growth. Other than the amenities and features offered within the building, its accessibility to public transport, parking facilities, nearby retail and restaurant facilities are also important. Regarding industrial or warehousing investment, there is high demand for regions in close proximity to Port Louis and especially the port.

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