I got a plaintiff email the other day from someone asking this question: Will Amazon Kill Commercial Property In Australia?
If you live under a rock or never read the news, you might not know this…
Amazon (the American retail giant) is coming to Australia. They've bought warehouse space in Sydney and are ready to move in.
Apparently, it's going to kill Australian retail. People will go out of business everywhere, and it's going to end the Australian economy.
God the mass media love a bit of drama, don't they?
It's been a while since I've been to the States, but last I heard there were still shops open and businesses running… all over the place.
I'm in Europe right now – Amazon's been there for a while. I'm sitting in a cafe having my morning coffee.
Later I'm going to do a bit of shopping. From here it looks like every shop is open… no vacancies at all.
That's the problem with fear – it often has little or nothing to do with reality.
It's fear that stops many would-be investors from investing in commercial property, and by letting fear get the better of them, they are missing out on massive opportunity.
It's true that you can buy a lot of stuff on Amazon but Like I've said before, you can't get a haircut on Amazon, you can't get hot bread on Amazon… You can't fill up your car with premium on Amazon.
When your hot water service breaks down, you can't call a plumber on Amazon or have one come out in the middle of the night to fix an emergency leak.
There are just so many businesses that won't be affected at all by Amazon coming to Australia.
What many don't realise is that while it will affect some businesses negatively, it's also going to create new industry.
More jobs and new businesses will be created.
The need for commercial property won't change.
It's possible the demand for particular kinds of commercial property will change over time
…but if you are in evergreen businesses your income from commercial property should see no significant change.
When you are looking for a commercial, property have a think about the kinds of business that are in there or will go in there.
What are the uses for the building you are looking at.
This one is huge because if a tenant leaves the more varied uses the building can suit the more chance you've got of finding a new tenant that will be a keeper.
The first place to go to is the Council – this should be part of your due diligence. Find out the allowable uses according to them.
Then, from that list work out which your building could be easily used for and how easily it could be switched across to that use.
What do I mean by that?
Let's say you've got a shop.
And one of the allowable uses is a cafe. The space works but if you're going to swap it to a cafe you'd have to (or your cafe tenant, would have to install a commercial kitchen.
If you have a keen potential tenant who wants to put a cafe in there, then they may well be happy to complete those works.
If you have a shop tenant who leaves, and you want to put a cafe in there… but don't have that tenant… then it may pay you to install the kitchen and then advertise it as a cafe space.
These are all exit and safeguard strategies which are worth paying attention to right from the get-go.
Make those enquiries as part of your due diligence, and then you have that up your sleeve if you ever need it.
When you approach your commercial investing with a little common sense and some good strategy behind you, you can look at fear-mongering mass media and market changes (like Amazon) and smile…
…because you know that no matter what, your portfolio will keep producing good money for you.