Investing your funds in commercial real estate can make you the next millionaire. Research shows that the global commercial real estate market is worth $30 trillion. It’s such a big market indeed. In Kenya, real estate is growing at an alarming rate. The market is currently contributing more than 20% of Kenya’s GDP.

Among the types of real estate, commercial real estate seems to increase faster. However, before you invest in this business, you need an actionable guide to help you out. 

Now, lets dive in to understand more about commercial real estate.

What is Commercial Real Estate?

Commercial properties are usually designed for business activities. Whether you are planning to build houses and sell them later or if you want to lease office spaces, you will be doing commercial property business.

However, you must be patient when choosing the location to establish your commercial property. Remember that you may have to focus on more populated areas if you are targeting to build commercial buildings for retail businesses.

In big urban centers, commercial property can have multiple business models in the same building. For instance, one building can have retail stores on the ground floor and first floor, while the other can be for office spaces.

Read: Why are Houses so Expensive in Kenya?

The Main Categories of Commercial Real Estate 

• Retail. With this category, you rent your property to other business people who retail and wholesale consumable goods like cereals, groceries, shopping malls, etc. These kinds of commercial real estate are segmented into small to medium sizes that can accommodate such businesses. 
• Industrial. If you plan to invest in this commercial property, you should be prepared to construct big buildings that can accommodate manufacturers and warehousing.
• Office space. To invest in this comercial real estate, you need to segment your building into various small rooms suitable for offices. However, the offices should not be that small. Instead, you can choose to have larger office spaces and smaller ones.
• Hospitality. Hospitality involves those who provide services like big hotels, restaurants, medical centers, and lodgings. 
• Multifamily. A multifamily commercial estate involves selling or leasing big houses larger than fourplexes.

What to Consider Before Investing in Commercial Real Estate in Kenya 

1. Who are your target customers 

Commercial property is classified into different classes, which serve different clients. 

For instance, retail stores and office spaces require different space designs. Therefore, the type of commercial property you invest in brings in different clients with specific businesses.

2. What are the industry trends?

Commercial property investment is growing rapidly. Thus, it will be an excellent idea to have enough knowledge of trending issues in the industry. Indeed, requirements and features are changing, and your property should adjust.

3. Do you have a reliable source of money?

Commercial real estate is costly when you compare it with residential property. These are buildings for housing businesses, and that’s why they have higher price tags. Therefore, you must prepare to spend a lump sum of cash on your purchase.

You can search for an excellent lender to help you with that.

4. Is there growth potential?

Well, you are definitely after profits, and you can only get excellent profits if you put up your property in a highly populated area. For instance, if you target urban centers, near colleges, and other industrial sites, your business will grow since you will get more people willing to set up businesses.

5. Consider the rental/leasing rates. 

Of course, you need to get your investment return as soon as possible. So, consider investing in places with affordable rentals such that your houses won’t be vacant for so long. Remember that if the rent rate is too high, it might scare away the customers. And again, if the rent is very low, it will take longer before you get your Return On Investment (ROI).

Pros of Investing in Commercial Real Estate

• You will build more professional relationships with your clients. Remember that your tenants will also be doing business. So it will be a business-to-business relationship. As a result, you will learn other business models which you may try out in the future.
• There is a higher ROI with commercial property than with residential property.
• Your houses will always be neat and highly maintained. Your tenants will keep their business premises more presentable and highly maintained to draw more clients to themselves. As a result, you will not spend much money renovating your buildings.
• You won’t get disturbing calls from your tenants at odd night hours since they will also be resting like you.
• If you are buying a complete commercial property, it’s easy to know the price range. You can request the current owner to give you a copy of the income statement that you will use to determine the buying price.

Cons of Investing in Commercial Real Estate

• You need professional guidance. Therefore, you will have to hire a specialist to help you make sound decisions to grow your investment. 
• The initial investment needs lots of cash, unlike residential real estate.
• More people means more risks. Your property will attract your client’s customers, making the place more congested. As a result, accidents may occur within your property.
• You will also invest your time in the business because you will need time to do common area maintenance costs and enhance more public safety measures. Therefore, you will need to be around your commercial property more often than a residential property.

The Bottom Line

Always ensure you follow the correct guideline when investing in comercial real estate. If you take calculated risks, you can earn lots of money with your investments.

Frequently Asked Questions

1. What type of commercial real estate is profitable in Kenya?

As long as your property is in a populated area, you will make profits since your houses won’t stay vacant for long. In addition, the profitability of your commercial property results from the number of tenants you have.

2. Which type of real estate makes more money?

Commercial real estate makes more profits than residential real estate.

3. How can I invest in real estate with no experience?

The easiest way is to buy property to rent and become a landlord. That way, you won’t deal with more documentation.