Commercial Property Investment

Hi there,

I have recently invested in the commercial property sector (about 6 months ago) and by all accounts expected relativly good performance. As is always the case in these things, there are no guarantees, but I was told in no uncertain terms that commercial property was safer than residential, on an upward trend and expected to return +10% in it's first year. The fact is it has not even come close. More to the point, the value my investment has fallen by at least 5% since opening. It's early days I know, but my question is, do I hang in there and weather the storm or is there a chance that the current economic climate will continue to effect this area? Any insight or advice welcome.

could you give us some more details such as location, a brief description of the building, price paid etc

What was your investment time frame when you bought in to the fund - six months?

Sure. Initial investment capitol was 50K. Commercial properties are mainly in Germany and France but can spread to other countries as market develops. The buildings (of which there are currently between 2 and 4 are primarily office and/or warehouse properties.

Investment timeframe is open ended. Realistically though you buy into if for the medium term ~5 yrs or so. Assuming the backside doesn't fall out of it any time soon that is.

You'd be doing well to cover the spread and charges in 6 months imo. Property investment is for the long term, even 5 years is short - I'd be looking at 15 to 20 years. Short term volatility in any market shouldn't affect longterm strategy imo. Look at the media coverage of the ISEQ this week - pictures of bears and cries of crash last Monday, yet the index is up 300 odd points since last Friday's close.( or it was when I looked about an hour ago )

I would have thought that commercial is more volatile than residential. E.g. Demand for shelter being a constant; demand for retail, office and industrial space is dependant on the performance of the economy.

Commercial property is long term stuff and based on the three Golden Rules. Location, Location and Yes Location. Depending on the quality of the tenants and the extent and rent of the leases. Big problem has been in Ireland in the past 5 years, people were buying in Month 1 and by end Month 3 and made healthy profit. Looks like those days are about to die a death and many property so called experts are about to be badly burnt. Now that you are in take a look at each property and see about adding / getting extra value from them e.g. extensions / mezzanine floors, mobile aerials on roofs/ parking etc etc etc.

I agree about the term length and have basically accepted that it should be minimum 7-10 yrs. It bounced back there on Friday evening so looking a bit healthier right now even it's still under-performing modest expectations. Appreciate the input from all.