Commercial yield depends almost entirely on the quality of the tenants in the building. A 'great location' with a brittle tenant mix will under-perform a quiet location with strong anchors every single time.
This is what we look for before signing — and what we walk away from.
Look for anchors
A healthy building has 1–2 anchor tenants on long leases (5+ years) that pull foot traffic for everyone else. Look for grocery, pharmacy, bank, or a large QSR brand. They under-pay on rent but they earn the rest of the building its yield.
Diversify the mix
Avoid buildings where more than 40% of the rent comes from a single sector. A floor full of coaching classes will empty out in one bad cycle.
The sweet spot: 25% anchor, 35% F&B and lifestyle, 25% services (clinic, salon, bank), 15% offices.
Healthy commercial benchmarks
What we want to see before recommending a retail or office unit.
- 3.5+ yrs
- WALE
- 5% p.a.
- Rent escalation
- ≤ 40%
- Single-sector concentration
- 4×
- Tenant rev / rent coverage
Check the WALE
WALE (Weighted Average Lease Expiry) tells you how long the current rent roll is locked in. Anything above 3.5 years is comfortable; below 2 means you are inheriting a renegotiation cycle.
Rent escalation and coverage
Look for 5% annual or 15% triennial escalations, and tenants whose revenue at the location covers 4x the rent. Anything lower and your tenant is one bad quarter from negotiating down.
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