• Commercial real estate is booming across Australia, especially in high-demand sectors like industrial and logistics, which saw a 98% surge in investment over the past year.

• Unlike residential property, buying commercial real estate is a little more complex than buying a home. You’ll need to consider lease terms, zoning regulations, location demand, tenant history, yield, and any potential risks.

• A professional valuation report gives you a clear picture of your commercial real estate investment. It helps you understand its current market value, spot any red flags, and stay compliant with tax laws or SMSF requirements.

If you’re thinking about buying commercial real estate to diversify your investment portfolio, now’s a great time to get serious about planning and research. It’s a major step, and one that can pay off when you do it right.

But here’s the thing: commercial property isn’t like buying a home. The stakes are higher, the contracts are longer, and the fine print? A lot more complex. From lease agreements to zoning laws, there’s a lot to wrap your head around before jumping in.

That’s why we’ve put together this practical guide, to help you make well-informed decisions, avoid costly surprises, and get a clear idea of what to look out for before making your first (or next) commercial real estate investment.

Why buying commercial real estate is a smart move

Commercial property has been gaining serious momentum, especially in the industrial and logistics space. According to Capital Edge (2025), investment volumes in this sector nearly doubled to $5.4 billion, marking a 98% jump from this time last year.  

What’s driving it? The consistent growth of e-commerce, supply chain diversification, and ongoing infrastructure developments have made these spaces more valuable than ever. And it’s no surprise investors are drawn in – for longer lease terms, higher rental yields, and room for capital growth.

Compared to a residential property, buying commercial real estate also comes with a few hidden benefits like stronger cash flow, lower vacancy risks (in the right location), and tenants who are usually responsible for more of the property outgoings.

If you’re looking to diversify and build a more robust portfolio, commercial real estate could be a smart move. But if you’re new to all this, where do you even start?

Here are 10 essential things to consider before you buy commercial real estate, especially if you’re just getting into the game.

10 Essential Things to Consider Before Buying Commercial Real Estate

Every investment comes with some level of risk, and buying commercial real estate is no different. One of the biggest challenges? The market can change faster than you think. A location that’s booming today could look very different five or ten years from now.

Take new infrastructure developments for example. There’s usually a lot of hype before and during construction, where investors jump in early, hoping to cash in on nearby properties. But once the excitement fades, demand often slows, public interest shifts, and in some cases, zoning laws even change.

That’s why before you start exploring how to buy commercial real estate, it’s important to have a game plan first. A solid checklist can help you avoid expensive mistakes and give you the confidence to make smarter investment decisions.

1. Location, Demand, and Accessibility

Location is still one of the biggest factors to consider when investing in commercial property. But it’s more than just being near a main road or transport hub.

You’ll want to look at the bigger picture:

• Foot traffic – If you’re buying a retail space, being near high-density residential areas or busy walkways can be a major plus.
• Access to infrastructure – How easy is it to get to the site by car, train, or public transport?
• Parking availability – Especially important for logistics hubs, warehouses, and other industrial sites.
• Population growth – Is the local population growing, stable, or declining?
• Future development plans – Are there any upcoming big projects or zoning changes? A booming spot today could cool off if zoning laws or traffic patterns change down the track.

Pro Tip: Don’t buy into the hype around upcoming infrastructure without checking how it might affect the long-term demand. While investing early can pay off, not all developments deliver long-term value. A great location now doesn’t always mean long-term success, so it pays to do your research.

2. The Property’s Current Condition

Are you buying a new building, or has it been around for a while? Either way, you’ll want to take a close look at its structure, facilities, and maintenance history before making a decision.

Here are a few questions to ask yourself:

• Does it need any major repairs soon?
• Will you have to upgrade things like plumbing, electrical, or HVAC?
• Is it ready for tenants to move in, or will it need some work first?

Sometimes, a lower purchase price on an older building can be tempting, but the cost of repairs and upgrades can quickly add up. What looks like a bargain now could end up eating into your investment returns later.

3. Tenants and Lease Agreements

Another thing that can make or break a commercial property in Australia is the tenants and lease agreements tied to them. Many small to medium businesses sign a 3 to 5-year lease which offers decent stability and steady income. But ideally, you’d want a long-term lease that spans from 5-10 years.

Here’s what you need to look at when reviewing lease terms:

• How long are the current leases?
• Who’s responsible for outgoings like maintenance, insurance, land tax and council rates?
• Are the commercial tenants financially stable and reliable?

Pro Tip: Don’t skip the due diligence. Check your tenants’ backgrounds, payment history, and overall business health, and whether they’ve had issues in the past.

4. Vacancy Rate

Before you buy commercial real estate in Sydney (or anywhere), it’s worth checking the local vacancy rates.

A high vacancy rate might be a sign of low demand or an oversupply, both of which can affect your rental income and overall return. Whether you’re looking at an office space, retail shop, or industrial unit, too many empty properties in the area can be a red flag.

When trying to get a feel of the area, consider:

• How active is the foot traffic?
• Are nearby shops or businesses thriving?
• What types of commercial spaces seem to do well and attract long-term tenants?

A bit of local research can go a long way in helping you decide whether it’s a worthwhile investment.

5. Potential Yield

One of the main reasons investors turn to commercial real estate is the potential for higher rental yields compared to residential property. But commercial properties deliver different returns, and your yield can vary widely depending on your property type, location, and current market demand.

That’s why it’s important to crunch the numbers early on:

• What’s the projected annual rental income?
• What outgoings do you need to cover?
• How does that stack up against the purchase price?

Doing the math upfront gives you a clearer picture of the property’s potential yield, and helps you avoid jumping into an investment that doesn’t meet your expectations.

6. Independent Valuation Report

Before you commit to buying commercial real estate, you need a clear, professional assessment of what it’s really worth, and that’s where a professional valuation report becomes essential.

It’s not just about the purchase price. A well-prepared valuation takes into account the property’s condition, location, income potential, zoning, and comparable sales data. It can also highlight some risks or red flags that aren’t obvious at first glance. If you’re buying a commercial or industrial property, it also gives you a clear idea of market rents, so you’ll know exactly what to charge to stay competitive.

And if you’re ever audited or need to justify your purchase, especially for tax or SMSF reporting, it’s the document you’ll be glad you have.

7. Zoning Laws and Property Flexibility

Zoning laws play a big role in what you can and can’t do with a commercial property. And the reality is, they can change over time. So make sure the current zoning aligns with how you plan to use the property.

Want to take it a step further? Look for a property with flexible zoning that supports multiple uses or tenant types. That way, if demand shifts or your investment goals change, you still have other options; whether that means leasing to different types of tenants or repurposing your property.

8. Free from Property Litigation

This one’s non-negotiable. Before you sign anything, make sure the property doesn’t come with any legal baggage. Check for any ongoing disputes, legal claims, ownership issues, or unpaid council rates involving the property.

The last thing you want is to invest a huge amount only to find yourself tangled in someone else’s legal mess. A thorough title and legal check now can save you a lot of time, stress, and money later on.

9. Property History and Performance

Before you buy, take a closer look at how the property has performed over time.

• Has it consistently brought rental returns?
• How long has it been on the market?
• Has the rent dropped over time, or has it been sitting vacant for months?

Assessing whether a commercial property is a good investment starts with reviewing its sales history and past performance. This can reveal potential red flags or give you confidence that the property has solid long-term potential. Because if it hasn’t performed well in the past, there’s often a reason why, and you’ll want to know it before you sign anything.

10. Budget and Terms of Sale

When it comes to buying commercial real estate, factoring in the purchase price is just one piece of the puzzle. To get the full picture, make sure you’ve accounted for all the extra costs that come with the transaction, like:

• Legal and conveyancing fees
• Valuation and inspection reports
• Transfer duty
• Any potential repairs or fit-outs

Having a clear and realistic budget from the start helps you avoid surprises and makes sure that the property aligns with your investment goals.

Then there’s the sales contract. Before you sign on the dotted line, take the time and give it a proper read.

• Are there any special conditions or clauses you need to be aware of?
• What’s actually included or excluded in the sale?

Taking the time to go through these essentials (and getting the right experts on board) gives you the best shot at making a smart, profitable investment.

Final thoughts

Buying commercial real estate can open up great opportunities, but it also comes with more moving parts than residential property. From location and leasing terms to zoning laws and potential risks, it pays to do your homework before making a move.

That’s why getting an accurate valuation needs to be a part of your plan early on. It gives you a clear picture of what the property’s really worth, highlights any potential risks, and helps you make decisions with confidence.

At Independent Property Valuations (IPV), we’ve been helping investors across Sydney and NSW for decades with trusted, ATO-compliant reports that are built to stand up under scrutiny, giving you peace of mind.

Still wondering whether to buy that commercial property?

Get in touch today with our team of trusted valuers. Let’s make sure you have the right experts on your side before you make your next move.