Beyond Sydney’s Housing Frenzy: The Case for Commercial Property

Sydney’s residential property market has a reputation: competitive, expensive, and in many areas, yielding modest rental returns. For investors who are priced out of prime suburbs or frustrated with low income from residential rentals, commercial property is becoming an increasingly attractive alternative.

Sydney residential market exhausting you? You may like to consider commercial property for your next investment

Why Yields Stand Out

Residential yields in Sydney often sit around 3 - 4%, even on million-dollar-plus purchases. Commercial and industrial assets, by contrast, can deliver 5 - 7% or more.

Take Western Sydney. A small warehouse leased to a trade supplier might rent for $70,000 a year on a $1.1 million purchase price - a yield of about 6.3%. A residential apartment at the same value could bring in $45,000 a year (closer to 4%). The difference is clear: commercial property often offers stronger cash flow, which can make holding the asset easier and more rewarding.

Why More Investors Are Turning to Commercial

1. Long Leases and Predictability

Commercial tenants want security for their businesses. Five- or ten- year leases (often with further options) are common, and many include fixed or CPI-linked rent reviews. That means less turnover and more certainty for landlords.

2. Outgoings Passed to Tenants

In many commercial leases, tenants pay the council rates, insurance, and even maintenance costs. This structure helps investors enjoy cleaner, more predictable net income than they would from a residential property.

3. Demand Driven by E-Commerce and Growth Sectors

The industrial sector, in particular, is benefiting from strong demand. Warehouses, logistics hubs, and storage facilities are in high demand thanks to online shopping and population growth. Medical and allied health suites are another growth story, with demographics supporting long-term tenant need.

4. A Counterbalance to Residential Madness

With Sydney houses regularly selling for millions and apartments yielding less than 4%, many investors see commercial property as a way to sidestep the frenzy. It offers access to strong income returns without competing with first-home buyers and families at crowded auctions.

5. Capital Growth Still Matters

It’s not just about cash flow. Industrial land in Sydney is limited, and the scarcity factor has supported long-term growth. Well-chosen commercial assets in growth corridors can provide both income and appreciation.

What to Keep in Mind

Commercial isn’t without its challenges. Vacancies can last longer than in residential, and lenders usually want higher deposits. It’s an area that rewards due diligence and good advice - but for many investors, it’s proving to be a smart way to grow wealth while avoiding the brutality of Sydney’s residential market.

Are you wanting to explore other property opportunities aways from Sydney's overheated residential market? Call me today to discuss commercial property lending.

Not financial advice. Always consult your accounting professional or financial advisor prior to deciding on a major acquisition.