Commercial Real Estate
Commercial Property: Questions Before You Commit
Research note | 7 min read | Educational research
Tenancy durability, realistic yield framing and the costs that rarely appear in the pitch.
Commercial purchases are frequently presented as a yield number. A yield is an output of assumptions, and the assumptions deserve more scrutiny than the number.
Start with the tenant: business durability, lease term, escalation structure, security deposit and the cost of re-tenanting if they exit. A high rent from a fragile occupier is a weaker position than a moderate rent from a stable one.
Model vacancy explicitly rather than assuming continuity. Then subtract every outgoing — maintenance, taxes, statutory charges, brokerage on re-letting and periods of fit-out.
What remains is a defensible expectation, stated as a range with its assumptions visible. We do not present guaranteed returns, because none exist.
Key Points
- Test the tenant, not just the rent
- Model vacancy explicitly
- Account for all outgoings
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Consultation
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