Should you buy your small business premises?

Whether it’s a shop, office or factory, buying your business premises may be a way to build your asset base and create an income stream from the rent. This can be an especially useful source of earnings when you retire. So what should you consider if you’re thinking of buying your business premises?

What’s the outlook for retail properties?

When considering a property investment, it’s a good idea to first obtain an understanding of the market. For instance, property firm Colliers’ Q3 2025 retail snapshot indicates that retail property in Australia continues to demonstrate resilience, with strong fundamentals underpinning the market.

“Despite high demand from investors, there is currently limited transaction opportunities as owners hold onto assets, highlighting retail as a bright spot within the property market,” says Dr Diaswati (Asti) Mardiasmo, chief economist, PRD National Real Estate.

According to Dr Mardiasmo’s figures, rental growth is also trending upwards, with gross rents increasing by 0.3 per cent, quarter-on-quarter nationally across retail properties.

“Vacancies tend to be lower and more stable for neighbourhood strip shops, service retail and essential retail like grocery, medical and convenience,” says Mardiasmo.

The Colliers Q3 2025 retail snapshot reveals neighbourhood shopping centres are producing average yields of between 6.0 per cent and 6.5 per cent across the five main capital cities of Australia.

“Small commercial and office properties that are older, less well located or lacking amenities are being heavily discounted, with incentives and longer rent-free periods being used to attract tenants. Lower grade buildings are under pressure,” says Mardiasmo.

“Conversely, premium and well-located small office spaces with good access, amenity and sustainability credentials are doing better. Tenants are being more selective, leaning toward quality, safety, green features and flexible layouts.”

Identify the right opportunity 

Market factors aside, there are many different considerations when you’re identifying commercial premises to buy.

If you’re investing in retail premises, it may help to look for well-located and accessible properties.

”If workers and clients can’t easily access the shop by public transport, then it needs to have ample parking. Proximity to public transport and major roads is ideal,” says Mardiasmo.

Analyse the competition in the area to assess how your business will thrive in the chosen location, considering the neighbouring tenants. It’s also often important to assess the property’s condition and to consider the maintenance costs or upgrades that will need to occur. Newer buildings will generally have less maintenance costs and will likely be more environmentally friendly.

In terms of returns, Mardiasmo says gross yields for small commercial spaces in Australia generally range from five per cent to ten per cent a year, depending on location, property grade and tenant stability.

“Returns are largely passive, coming from rental income and capital growth over time. If your goal is purely financial return, small commercial property can provide steady, moderate returns. But it’s also often impacted by broader property market and economic conditions,” she says.

It’s also worth figuring out if it may be better to rent.

“If your business profit margin is low and operating costs like mortgage repayments, rates and maintenance exceed the value of the rent you would otherwise pay, it may be more suitable to lease your premises,” says Mardiasmo.

Should your business generate higher profits, however, owning your own property can lock in occupancy costs and protect against rising rents, at the same time building long term equity and capital growth. It also gives the business control in terms of layout and expansion.

Why insurance matters

Commercial property can be a significant investment, so ensuring it’s properly protected is essential. Speak with your Steadfast broker today to help ensure you have the right insurance in place to safeguard your assets and business continuity.

 

 

 

 

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