When buying a leased commercial property, the quality of the tenants matters as much as the bricks and mortar.  An attractive price and a strong yield count for little if the business paying the rent is unlikely to stay for the long term. 

Demand on the Gold Coast is strong right now, with a large pool of investors competing for commercial assets. While the highest headline return can often be hard to resist, Kollosche Commercial Sales Agent Adam Grbcic urged buyers to take a long-term view. 

“You are better off having the security of a long-term tenant than chase higher yield at the expense of an unstable tenant,” Adam said.  

If you don’t, investors could end up with a vacant property for extended periods, negating gains made through yield. 

“A vacant building costs far more than lost rent,” Mr Grbcic said.  “Rates and insurance still fall to the owner, and finding a replacement often means agent fees and rent-free periods. That is why experienced investors assess the business inside a property ahead of any return.” 

So how do you know if a tenant will remain ‘sticky’?  

Mr Grbcic said one of the most telling indicators was how long the tenant had already been in situ. 

“A business that has traded from the same premises for a decade or more has usually invested in making the site work for their purposes, and a history of lease renewals suggests the relationship is likely to continue,” he said. 

Investors also need to understand the covenant behind the tenancy, meaning the financial strength of whoever is legally responsible for paying the rent.  

“The trading name on the building is not always the entity on the lease, so it is worth confirming who signed and how sound their finances are,” Mr Grbcic said. 

Another key thing to consider is the cost for the tenant to relocate.  

“Operators that depend on large purpose-built equipment, permits tied to their address or a building size that rarely becomes available face considerable expense and disruption if they move, which gives them a strong reason to stay put.” 

Finally, a tenant’s payment history shows how their business is run. Several years of rent paid on time, without missed payments or requests for reductions, points to a dependable operator.  

“That consistency is more often than not worth more than a marginally higher or headline-grabbing yield,” Mr Grbcic said. 

Mr Grbcic said stonemasons relied on heavy, specialised cutting and handling equipment and needed a substantial site with room for slab storage and truck movements.

Considering a commercial investment? Talk to the Kollosche Commercial team about assessing a tenancy before you buy.