What Is the Average Return on Commercial Property?

The average rate of return on a commercial property must take into account several factors, including but not limited to the cost of the property, the initial investment in getting it ready for tenants, and the ongoing maintenance costs. Many times, people will have an inflated view of the average rates of return because they fail to factor in the expenses and maintenance costs that come with owning commercial property.

Average rates of return can vary month-to-month and year-to-year, so you want to make sure you’re taking a larger view of the property rather than putting a lot of stock into the daily or monthly fluctuation.

Overall, a low performing property will have a rate of return closer to 6% while a high performing property will reach rates of return of 12% or better. Within your investment portfolio, you will likely have properties that are performing poorly and making no money. One that may even be costing you money while another is a home run making more than 12%.

Mathew Laborde, CCIM
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