There’s no doubt about it that investing in commercial real estate can be a lucrative endeavour. The thing about commercial real estate is that the influencing factors and the investment landscape vary greatly compared to residential properties. In a place like Phuket, where commerce is primarily seasonal, the volatile business climate can increase the risks involved with a commercial investment, but can, of course, create the potential for greater reward.

This leads us to the foremost consideration and goal of commercial real estate investments: the potential for higher returns, especially compared to residential properties. Commercial properties like office spaces, retail shops, and industrial complexes are known to generate higher rental income. The reasons are typically because of longer leases, multiple tenants per structure, and limited availability in desirable locations.

It’s important to consider that in terms of commercial real estate, the responsibilities of the renter and landlord can vary significantly depending on the specific geographical location. In some parts of the world, the owner of a commercial may be willing to make certain improvements to the property in exchange for a longer lease agreement from the renter. Generally, in Phuket, it doesn’t work that way. In most cases, a new tenant gets what they see and any improvements or renovations are solely their responsibility. As such, the tenants are the ones who will often seek to secure a longer lease to make their investment worth it. For landlords, this can help provide stability knowing that there is a stable return on their investment for the duration of the contract. 

Another reason why a tenant in a commercial building will be looking to secure a longer lease is they simply don’t want to have to move their business. Depending on the type of business, it can be a serious challenge to relocate as it may involve another investment in renovations or remodelling, moving equipment and furniture, change of address with multiple government agencies and online platforms, and other possible unknowns. 

On the other hand commercial real estate is not all blue skies and butterflies. One of the main drawbacks of investing in this market is the higher initial investment required. Commercial properties are typically along main thoroughfares and thus more expensive than residential properties. This makes the bar of entry quite high unless you possess a mix of luck and savvy foresight to get in early to an up-and-coming hotspot. 

Then of course there’s the matter of a volatile business environment. We’re likely all keenly aware of this with the COVID-19 pandemic still fresh in our minds. During the pandemic, the residential real estate market remained fairly strong all things considered. However, the commercial real estate market basically went belly-up for nearly two years. 

While many of the popular spots in Phuket are enjoying a strong business environment, the pool of potential tenants for a commercial space is smaller than a residential unit. Everyone needs a home, but not everyone runs their own business. 

So there you have it, some of the potential ups and downs of investing in commercial real estate in Phuket. Of course, if it were easy and always profitable everyone would do it. However, with careful consideration, developing an understanding of Phuket’s commerce landscape, and a little luck, commercial real estate can potentially be a smart and rewarding investment.