Residential or commercial property investment: which is better?

Across Australia, both residential and commercial real estate offer compelling opportunities for investors. The question is, which type of property is the best type of investment? 

In this article, we examine the key advantages and drawbacks of investing in residential and commercial properties in Australia. We also explore the differences between building and buying to help you make the most of your investment. 

Is commercial property a good investment?

In Australia, the commercial property market shows promising signs of recovery in 2025. Interest rates are expected to ease, providing the opportunity investors have been waiting for. Particularly in the sub-$20 million market, momentum is starting to build.

With a rising demand for sustainable and well-designed buildings, many existing properties face upgrades or repurposing. As an investor, it is likely worth building new premises rather than buying an existing building.  

Typically speaking, commercial investment isn't as common as residential, therefore could lead to higher returns, as there are fewer options for the tenant. Another advantage is the post-rental clean-up. Compared to residential properties, commercial rental clean-up is typically more straightforward and less costly.

In summary, owning commercial property can be a great investment, offering multiple benefits:

• Longer lease terms and fewer vacancy periods.  
• Fewer maintenance costs compared to residential property. 
• Higher long-term return than may be available through other investments. 
• Diversify your investments. 
• Avoids the increasingly regulated residential market. 
• A great opportunity for capital growth.
• Simpler post-lease clean-up. 

Use our Commercial Building Returns Calculator to compare lease vs build costs and see what makes the most sense for you.

Residential vs commercial property

Investing in residential property provides stable demand, a larger tenant pool, and easier entry due to lower capital requirements, making it an accessible option for many investors. However, challenges such as high tenant turnover, strict regulations, rising maintenance costs, market saturation, and tax implications can impact long-term profitability.

On the other hand, commercial property investment typically requires higher upfront capital and comes with a more complex, market-sensitive landscape, greater tax implications, and a higher risk of vacancy. However, commercial properties offer higher rental yields, longer lease terms, greater diversification, and more professional tenants, making them an attractive option for investors seeking long-term returns. 

A residential lease is also more complex because you are dealing with personal situations. The paperwork and regulations are often more complicated and layered with emotion. With commercial tenants, you are dealing with business people instead, meaning the relationships are often much simpler. 

Ultimately, the best investment choice depends on your financial goals and risk tolerance. Conducting thorough research and consulting with legal and tax experts before making any decisions is recommended. 

If you're considering investing in commercial property, read on to understand key factors and explore how to get started with commercial property investment.

How to invest in commercial property — Build vs buy

If you want to invest in commercial property, is it best to build or buy? The best choice depends on your specific investment goals, resources, and risk tolerance. 

Buying an existing commercial building

When buying an existing commercial building, you can start generating income almost immediately. With many commercial property sales, the space is already tenanted, providing you with immediate rental income and the potential for a faster return on investment. 

However, existing buildings also have their downsides. Specifically, there is less opportunity for customisation, more maintenance requirements, and the potential for hidden problems. With these challenges in mind, it can be difficult to find the right commercial building to invest in, especially when you consider current market availability. 

Building new commercial premises

Building a new commercial space offers the opportunity to customise the building and incorporate modern infrastructure to align with your investment goals. While this may come at a higher upfront cost and require finding buildable land, you gain more control over how your resources are allocated. 

Building allows you to design the space according to your preferences and the local commercial market. This means you can market to higher-quality and higher-paying tenants. You can even involve prospective tenants in the design process, incorporating their core requirements so they are more inclined to become long-term occupants. 

A new commercial building also provides up-to-date infrastructure, technology, and energy-efficient features. This reduces maintenance costs, attracts high-quality tenants, and allows you to charge higher lease rates. 

However, there are a few potential drawbacks to think about. For starters, the construction process can be long and prone to delays. Fortunately, the repercussions can be minimised with a fixed-price quote. 

You may also find it harder to access finance because banks often view construction as high-risk. However, we are happy to help with a fixed-price quote. 

In summary, buying an existing property provides faster returns while building new premises offers more long-term benefits. 

Considerations for building a commercial property

If you want to build a commercial building, there are certain considerations to maximise your return on investment.

Customise your building to attract tenants

We recommend building your commercial shed with extra space and features to attract potential tenants. Consider what commercial tenants in your area need — is it a gantry crane? Is it an attached office space? Is it a firewall? 

It’s easier and more cost-effective to add these features during the initial build. Rather than waiting for a prospective tenant to ask, consider consulting a few potential tenants to ask what they need. Based on the types of tenants you want and the local demand, you can determine the popularity of your new building. 

Or, if you are looking into a commercial building to run your business and occupy, you will benefit from a customised owner/occupier shed.

Prioritise engineering

Commercial buildings must be well-engineered to ensure safety, durability, and long-term functionality. These structures must withstand high occupancy loads and operational demands, not to mention environmental factors like wind, earthquakes, and heavy rainfall. 

Structural steel sheds are popular due to their strength and durability. Hot dip galvanised steel is also commonly used for its rust resistance and minimal upkeep. 

Maximise building security

In commercial buildings, security is a high priority because tenants need to protect valuable assets, sensitive information, and employees. This requires a robust building capable of keeping unauthorised people out, using features like roller doors, reinforced doors, access control systems, surveillance cameras, alarm systems, and security lighting. 

Optimise for energy efficiency

Building new premises also enables you to incorporate better insulation, ventilation, and sustainability features. By improving energy efficiency, this will reduce heating and cooling costs, helping to attract quality tenants. 

Download our commercial buildings brochure

For more information and to explore our range of commercial and industrial buildings, download our free Commercial and Industrial Sheds brochure. At ABC Sheds, we offer free, no-obligation quotes for all of our sheds. Download your copy today and benefit from our 20th anniversary promotion in 2025.