Why This Question Is Suddenly Everywhere
Two things happened at once.
The first is the yield gap. A Perth house currently returns roughly 4.3% gross against a median around $845,000. Super prime industrial in Perth sits near 6.0% and Perth CBD prime office around 7.38%, with secondary office closer to 9%. On paper that is a different asset class doing a different job.
The second is the May 2026 federal budget. It removed negative gearing for new established residential purchases — but left the treatment of commercial property intact. That asymmetry is now shaping investor behaviour, and it is the single biggest reason my commercial enquiries have roughly doubled since the budget landed.
So the interest is rational. What worries me is how often the conversation stops at the yield number.
A client came to me in March with a tenanted showroom in an industrial pocket south of the river. Good yield on the listing. What the listing did not lead with was that the lease had fourteen months to run, the tenant was a single-site operator in a sector under pressure, and the building had a specialised fit-out that suited almost nobody else. He would have been buying a fourteen-month income stream and a re-letting problem, at a price that assumed neither.
That is the whole of it. Commercial yields are higher because commercial risk is lumpier. Not worse — lumpier. Understanding the shape of that risk is the entire skill.
Perth Commercial Property by Sector
“Commercial” is not one market any more than “Perth” is one suburb. Industrial, office and retail are behaving very differently right now, and a first-time buyer needs to know which room they are walking into.
| Sector | Yield | Vacancy | Rent Direction | Condition |
|---|---|---|---|---|
| Industrial / logistics | ~6.0% super prime | 2.0% | Super prime net face rents ~$165/sqm, up 6.5% q-o-q | Tightest in AU |
| CBD office — prime | ~7.38% | 16.9% | Prime net effective rents up ~4.0% y-o-y | Two-speed |
| CBD office — secondary | ~9.00% | 16.9% (all grades) | Weakest demand of any Perth segment | High risk |
| Retail | Highest of the three | Centre dependent | CBD super prime incentives down to 17.5% from 25.0% | Selective |
| Suburban office (150–250sqm) | Varies widely | Tighter than CBD | Median office price ~$4,844/sqm, up 9.8% | In demand |
The two headline facts a first-time buyer should sit with
Perth industrial is the tightest industrial market in Australia at 2.0% vacancy. Land values for small lots have been climbing hard — around 0.25ha lots averaging $777/sqm, up over 21% year-on-year, with medium lots up around 15%. Scarcity is doing the work: planning delays, power and water connection bottlenecks, and trades being pulled into mining and infrastructure have all slowed new supply.
Perth CBD office is a genuinely two-speed market. Headline vacancy near 17% sounds alarming, and for secondary stock it should. But there are currently no office projects under construction in the Perth CBD, which means the supply side is about to work in favour of good buildings. Prime and secondary are not the same trade. A 9% yield on a B-grade tower with short leases is not a bargain; it is the market pricing what it thinks of the risk.
The sector you buy into matters more than the yield on the listing. We help clients work out which one actually fits their position.
Book a Discovery Call →Six Differences That Catch First-Time Buyers
These are the ones that show up in the first commercial transaction and surprise people who have only ever bought houses.
| Residential | Commercial | |
|---|---|---|
| Typical LVR | Up to 80–90% | 65–80% |
| Deposit required | 10–20% | 20–35% (first-timers often 25–35%) |
| LMI available | Yes — bridges a small deposit | Generally not available on commercial security |
| Loan term | ~30 years | 5–15 years, reviewed every 1–3 years |
| Lease length | 6–12 months | 3, 5, 10 years with options |
| Outgoings | Landlord absorbs most | Often passed to the tenant under net lease |
| GST | Generally not applicable | 10% may apply; going-concern and margin scheme exceptions |
| Re-letting period | Perth houses ~14 days | Months, sometimes longer, plus incentives |
| Fit-out and incentives | Rare | Standard — Perth industrial incentives ~15% |
| Valuation basis | Comparable sales | Income — lease quality drives the number |
1. Your deposit is bigger, and there is no safety net above the ceiling
Commercial LVRs typically land between 65% and 80%, so you are funding 20–35% of the purchase yourself — and first-time commercial buyers usually sit at the higher end of that range. Lenders mortgage insurance, which lets residential buyers settle on a small deposit, is generally not available on commercial security. The LVR ceiling is a hard ceiling. Most buyers bridge it with equity from an existing property rather than cash.
2. The lease is the asset
This is the mental shift. In residential, you buy a property and rent follows. In commercial, you are buying an income stream that happens to have a building attached. Lenders read it that way too: a five-year lease to a strong national tenant is assessed very differently from a month-to-month arrangement, and some lenders will reduce the LVR or decline outright where the lease expires inside twelve months.
Which is exactly what would have happened to my March client, if he had got that far.
3. Vacancy is measured in months, not days
Perth residential vacancy sits near 0.5% with houses letting in about a fortnight. A vacant commercial property can sit for months, and when a lender assesses a vacant asset it treats the deal as having no rental income at all — you have to demonstrate your wider position can carry the loan through the lease-up. Your cashflow model needs to survive a genuine void period, not a two-week gap.
4. GST enters the transaction
Commercial purchases can attract 10% GST on top of the price. Two common exceptions exist: the going-concern exemption, where a tenanted property is sold as an ongoing business, and the margin scheme. Both require specific contract provisions and both parties being GST-registered. If you are registered you can generally claim the GST back through your BAS — but the timing matters, because you may need the cash at settlement before the refund arrives. This is accountant territory, not agent territory, and it needs to be sorted before you sign, not after.
5. Outgoings usually run the other way
Under a typical net lease the tenant covers council rates, water rates, insurance, strata levies and often maintenance. That is a genuine structural advantage over residential, where the landlord absorbs most of it. It is also why the gap between gross and net yield is narrower in commercial than people expect — and why you must read which outgoings the lease actually assigns rather than assuming the standard.
6. The valuer works from income, not comparables
Where the passing rent is above market, a valuer will typically adjust down to market rent when calculating value — which can shrink the loan you were counting on. Where rent is below market, the valuation is struck at the contracted rent, understating what the asset could do. Knowing where your property’s rent sits against market is how you predict the valuation before it lands.
In residential you buy a building and the income follows. In commercial you buy an income stream that happens to have a building attached. Almost every first-timer’s mistake traces back to that one inversion.
— Raj Moturu, Enrich Buyers AgencyWhat the 2026 Budget Changed — and Didn’t
The budget reshaped residential investing. Its effect on commercial is mostly indirect, and that indirectness is the point.
Negative Gearing Removed for New Established Purchases
New established residential purchases no longer qualify for negative gearing deductions against other income. Pre-budget purchases keep the existing rules.
From 1 Jul 2027Negative Gearing Treatment Retained
Commercial property was not subject to the same removal. Sector commentary points to this asymmetry potentially driving future demand toward commercial assets.
Confirm with your accountantTrust Tax Rate Rising to 30%
A new 30% rate for discretionary trusts affects investors on both sides. If you are considering a trust for a first commercial purchase, model this before you settle the structure.
From 1 Jul 2028Be careful with this one. A tax asymmetry is a reason to look at commercial. It is not a reason to buy a commercial asset you don’t understand. A tax advantage on a badly-leased building is still a badly-leased building — and every spruiker in the state has already noticed the same asymmetry you have.
I have written separately about how the spruiker playbook adapted after the budget. Commercial is where a lot of that energy has redirected, because the buyer pool is less experienced and the assets are harder to benchmark.
Where Each One Genuinely Wins
Neither asset class is better. They solve different problems, and the honest comparison looks like this.
The one that decides it for most people is liquidity. If you may need to exit inside five years, commercial is the wrong vehicle — the buyer pool is thinner, the sale process is longer, and a lease expiry sitting close to your sale date will cost you real money at exactly the moment you can’t afford it.
Who Should Actually Make This Move
In my experience there are three profiles where a first commercial purchase makes real sense, and one where it usually doesn’t.
The business owner buying their own premises
This is the strongest case and the one I say yes to most often. You already know the tenant intimately, because it is you. You remove your own rent risk, you build equity instead of paying a landlord, and strong owner-occupiers buying quality industrial can often reach 80% LVR — the top of the commercial range. For medical, dental, allied health and professional practices, buying the suite you already occupy is frequently the cleanest wealth decision available.
The investor with equity and no need for liquidity
If you hold established residential with real equity, no plans to sell inside a decade, and income that doesn’t depend on the asset, commercial adds a genuinely different return profile to a portfolio. Note that lenders reward experience — a borrower with existing commercial holdings often accesses better terms than a first-timer with identical financials.
The SMSF buying a small industrial or suburban office asset
Long leases, tenant-paid outgoings and predictable income suit a super fund’s time horizon well. The rules around structure, borrowing and related-party leasing are strict and unforgiving, so this needs your accountant and SMSF adviser involved from the first conversation, not the last.
Who should probably wait
If the deposit would stretch you, if you might need to sell within five years, or if the appeal is purely the yield number on the listing — wait. Commercial punishes thin buffers. A twelve-month vacancy on a residential property is an inconvenience. On a commercial property with a 70% LVR and no other income covering it, it is a different kind of problem entirely.
Before You Sign Anything
Work through every item below before your first commercial contract. Print it if that helps.
Read the full lease, not the summary — term, options, review mechanism, make-good, assignment clauses
Confirmed how long until expiry, and what your lender says about that timeframe
Assessed the tenant’s covenant — trading history, sector outlook, single-site or multi-site
Compared the passing rent to market rent, and predicted the valuation outcome
Confirmed which outgoings the lease assigns to the tenant, in writing
GST treatment resolved with your accountant — going concern, margin scheme, or standard
Cash at settlement modelled as deposit plus stamp duty plus GST timing plus legals
Cashflow stress-tested against a realistic vacancy period, not a two-week gap
Budgeted for re-letting costs — agent fees, incentives, fit-out contribution
Checked zoning and permitted use against the current and likely future tenant
Assessed how specialised the fit-out is — who else could occupy this building?
Confirmed loan term and review frequency, not just the headline rate
Ownership structure decided — personal, company, trust or SMSF — with the 2028 trust changes modelled
Written a 10-year exit plan, including what happens if the tenant leaves in year three
Frequently Asked Questions
Neither is universally better — they solve different problems. Commercial currently offers materially higher income, with Perth super prime industrial near 6.0% and CBD prime office near 7.38%, against roughly 4.3% gross on a Perth house. Residential offers easier finance, near-zero vacancy risk at around 0.5%, and a much deeper resale market. The right answer depends on your deposit, your liquidity needs and your time horizon.
Commercial lenders typically cap LVRs between 65% and 80%, meaning a deposit of 20% to 35%. First-time commercial buyers usually sit at the higher end, and lenders mortgage insurance is generally not available on commercial security, so the LVR ceiling is a hard limit. On top of the deposit you need cash for stamp duty, legals, and potentially the GST component at settlement before any BAS refund arrives.
Often, yes — 10% on top of the purchase price. Two common exceptions apply: the going-concern exemption, where a tenanted property is sold as an ongoing business, and the margin scheme. Both require specific contract provisions and both parties being GST-registered. If you are GST-registered you can generally claim it back through your BAS, but the cash flow timing matters at settlement. Resolve this with your accountant before signing.
The budget removed negative gearing for new established residential purchases from 1 July 2027 while leaving commercial property treatment intact, and industry commentary has flagged that asymmetry as a potential driver of demand toward commercial assets. The separate trust tax rate increase to 30% from 1 July 2028 applies regardless of which asset class you hold. Confirm how any of this applies to your position with a qualified accountant.
Small industrial and suburban office assets are generally the most forgiving entry points. Perth industrial has the tightest vacancy in Australia at 2.0%, and demand for smaller suburban professional suites in the 150–250sqm range has been strong. Secondary CBD office carries the highest headline yields for a reason — vacancy across the CBD sits near 17% and re-letting risk on lower-grade stock is real.
For many established business owners this is the strongest first commercial move available. You know the tenant covenant better than any buyer could, you remove your own rent risk, and strong owner-occupiers buying quality industrial assets can often access up to 80% LVR — the top of the commercial range. The decision usually turns on whether tying up the deposit costs your business more than the equity you build.
Start With the Lease, Not the Listing.
20 minutes. No obligation. No property listings. An honest read on whether commercial fits your position — including when the answer is not yet.
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