27% Cheaper To Build Than Rent!

As we all know the RBA reduced the cash rate by 25 basis points last month due to the global economy continuing to grow at a lower than average pace.  This has brought commercial lending rates lower than they have been for decades.

Commercial rates are now sitting around the mid to high 4’s with most of the major institutions requiring 30% equity from either property or cash.

With rates now reduced to an all-time low and leasing costs for industrial and commercial buildings now on a steady climb we investigated whether it was better to build or rent?

We conducted three case studies for Industrial developments worth $2m each in Brisbane, Yatala and the Gold Coast.  Based on borrowing the full $2m and being 100% geared, borrowing at a rate of 4.8% pa, on an interest only loan, we found that buying was between 23% to 27% cheaper than renting.

So, is it better to buy industrial land and build or rent an existing property?  Well the answer is clear that with the current interest rates it’s cheaper to build.

If you need any more information on Commercial or Industrial developments please call 1300 11 25 11.  Or visit www.clarkes.net.au.