If you own or are buying commercial property, these are the terms and disciplines that actually determine whether your investment performs well.
Yield: The Number That Values the Property
Yield is straightforward: it's the rent as a percentage of the purchase price.
Example: A property earning $80,000 per year bought for $1,400,000 = 5.7% yield.
A lower yield means the market values the income highly (safe tenant, long lease). A higher yield usually means more risk — shorter lease, weaker tenant, or less desirable location.
In Melbourne's western suburbs right now, prime industrial assets in Truganina trade at 4.5–5.5% net. Secondary industrial in Laverton and Altona trades at 5.5–6.5% net. Retail and offices range from 5–6.5% depending on quality and lease terms.
Face Rent vs Effective Rent
Face rent is the headline number. Effective rent is the real number after incentives (rent-free periods, fit-out contributions) are deducted.
A property advertised at $400/m² with 3 months' rent-free on a 3-year lease is actually costing the landlord closer to $300/m² in effective terms. When comparing investments or making leasing decisions, always use effective rent.
WALE: Your Income Security Indicator
WALE (Weighted Average Lease Expiry) tells you how many years, on average, your tenants are contracted for.
- WALE of 5+ years = income is secure. Banks love it. Buyers pay lower yields for it.
- WALE of 1–2 years = re-leasing risk on the horizon. Factor this into what you pay.
When a vendor quotes WALE, always ask whether option periods are included. They shouldn't be — options are the tenant's right, not their obligation.
What Good Asset Management Actually Looks Like
Most of the value lost by commercial property owners is lost silently — through missed rent reviews, late outgoings reconciliations, and tenants being allowed to drift toward lease expiry without a renewal conversation.
Good commercial property management means:
- Every rent review captured on time (a missed review is permanent income lost — it can't be backdated)
- Outgoings reconciled annually (are tenants paying the right amount?)
- Tenants contacted 12–18 months before expiry, not at expiry
- Make good enforced properly at lease end
Management fees in Melbourne's western suburbs typically run 4–8% of gross rent. The cheapest manager is rarely the best-performing one.
The 2026 CGT Change Every Investor Needs to Understand
From 1 July 2027, the 50% CGT discount for assets held 12+ months will be replaced with cost-base indexation and a 30% minimum tax on net gains. This applies to commercial property.
For long-term holders, indexation often delivers comparable outcomes to the 50% discount — but the calculation differs. If you are considering selling a commercial asset in the next 12–18 months, talk to your accountant about whether selling before or after 1 July 2027 is the right call for your situation.
→ Investment fundamentals: Commercial Property Investment Guide
→ The basics of commercial leases: Commercial Leasing Guide