Investment in a shopping mall is one of the best ways to secure your investments and also diversify your portfolio. If you are thinking of purchasing commercial property, then you should take a look at both the merits and the demerits of investing in a shopping mall and weigh both the options before making a decision.
Pros of Investing in a Shopping Mall
First, we will be discussing the advantages of buying commercial property.
High Returns on Investment
Since commercial property requires you to invest heavily, the chances of getting higher returns on investment is also large. Residential properties usually have lower rents as compared to commercial properties. A shop in a plaza will yield you a greater rental return than that of a residential property.
No Maintenance Needed
A biggest pro of purchasing retail space is that there is no maintenance needed. The management of the building takes care of the maintenance and you don’t have to spend time fixing construction related issues in your shop. There is a minimal maintenance cost that you have to bear and the rest of it is managed by the shop’s management.
Any form of investment is risky. Buying commercial property is a lot less risky as there are many stakeholders involved and it is spread across many people. Unlike residential property, where you buy a house and you are alone responsible for all the risks. However, investing in a shopping mall is quite different. There are many other investors who have bought the property and therefore the risk is equally shared among all the investors.
Car parking space, lifts, security system, fire alarms and a lot other amenities are shared among the shopkeepers. So, if you invest in a modern shopping mall, you don’t have to worry about the security system or where your customers will park the car. All of it is managed by the building’s management. Similarly, in a shopping mall, food court, indoor amusement park are also maintained by the management and the investors benefit from these amenities. Sahiwal is a thriving business hub so if you are looking to buy commercial property then you should get shops for sale in Sahiwal.
Cons of Investing in a Shopping Mall
There are many disadvantages of buying a shop in a mall.
Dependency of Economic Conditions
One of the major disadvantages of investing in a shopping mall is that it is dependent on the economic conditions. If the economy is flourishing, more people would like to rent a shop and it would be easier to get hold of a long-term tenant. But if the economy is not flourishing, you might find less people interested in getting a shop on rent. The overall value of the shop could also decrease. Similarly, the infrastructural developments near a shop also matter. If there are new developments taking place, the interest in a mall would also increase.
Prolonged Vacancy for Tenants
It could be a possibility that there is a long vacancy and the shop largely remains empty for a prolonged period. The reason is the commercial property contracts are quite tricky and therefore less tenants agree to the terms for a long-term commitment. In such a case, you will not get any rental yield until you find a tenant.
Extra Upfront Costs
Most commercial properties have an additional upfront cost. Since commercial properties require large investments, the upfront costs can also be huge. Moreover, the property’s value can suddenly drop. This can cause a problem and you may not get the desired profit from your investment. Apart from the one-time investments, there are additional maintenance and upkeep costs that you have to bear. All these costs amount to a large number.
It is therefore important to weigh all the options before reaching a decision. Apart from the main cities like Karachi, Lahore and Islamabad, cities like Sahiwal also offer lucrative investment options as they are fast growing into a commercial hub. The area for business in Sahiwal is large and can reap good profits if you explore the different commercial properties there.