Commercial Property Return Calculator
How Commercial Property Returns Work
Commercial property returns differ significantly from residential. Unlike houses, commercial properties often have long-term leases with creditworthy tenants who pay most expenses. The net return is calculated by subtracting all operating expenses from annual rent and dividing by purchase price. This tool helps you understand potential returns for different commercial property types.
Property Details
What This Means
Net Return = (Annual Rent - Annual Expenses) / Purchase Price
Higher returns are achieved through triple-net leases where tenants cover most expenses
Typical Returns by Property Type
Results
Enter your property details to see your potential net return percentage.
When people ask what type of property makes the most money, they’re usually not talking about a weekend getaway or a starter home. They’re looking for the kind of property that pays you every month, grows in value over time, and doesn’t rely on selling it to make a profit. The answer isn’t a house, not even a luxury apartment. It’s commercial property.
Why Commercial Property Outperforms Residential
Residential rentals-houses, units, townhomes-make sense for first-time investors. They’re easier to finance, easier to rent out, and easier to sell. But they also have limits. You might get 4% to 6% annual return after expenses. In Melbourne, a three-bedroom house in Footscray might rent for $600 a week, but with rates, insurance, repairs, and vacancies, your net return drops to around 4.5%.
Now compare that to a single-tenant industrial warehouse in Dandenong. It might cost $1.8 million, but it’s leased to a logistics company for 10 years at $12,000 a month. That’s $144,000 in annual rent. After property tax, insurance, and minimal maintenance, your net return hits 8.5% to 11%. And the tenant pays for most repairs. No calls at 2 a.m. about a broken hot water system. No finding new renters every 12 months.
Commercial leases are longer, tenants are businesses, and the rent is often indexed to inflation. That means your income doesn’t erode over time. In fact, many commercial leases include 3-5% annual rent increases built in. That’s compound growth you don’t get with residential.
Which Commercial Property Types Make the Most Money?
Not all commercial property is created equal. Some types are steady, some are risky, and some are outright cash machines. Here’s what actually delivers the highest returns right now:
- Industrial warehouses and logistics centers - These are the top performers in 2026. With e-commerce still growing, companies need space to store and ship goods. A 5,000 sqm warehouse in Laverton leased to a major retailer can generate $150,000+ in annual rent. Vacancy rates in Melbourne’s industrial zone are under 2%.
- Net-lease retail spaces - Think pharmacies, supermarkets, or fast-food chains with long-term leases (10-20 years). A single-tenant NAB shop in a high-footfall suburb like Chadstone leases for $80,000 a year. The tenant pays all outgoings-rates, insurance, maintenance. You just collect rent.
- Medical offices - Doctors, dentists, and physiotherapists need stable locations. They sign 5-10 year leases and rarely move. A 300 sqm medical suite in Box Hill might rent for $60,000 a year with triple-net terms. Demand stays high even during economic dips.
- Self-storage facilities - This is the dark horse. A 10,000 sqm facility in Craigieburn with 150 units can pull in $180,000 annually. Operating costs are low, and occupancy rarely drops below 90%. You don’t need to manage tenants daily-most payments are automatic.
- Office buildings - Riskier now. Remote work reduced demand in CBDs, but regional offices and flexible workspace hubs (like WeWork-style setups) are still viable. Look for buildings with strong tenant covenants and recent upgrades.
Industrial and net-lease retail are the safest bets. Self-storage is the highest-margin play. Medical offices are the most stable. Choose based on your risk tolerance and capital.
How Much Capital Do You Need?
You don’t need $10 million to get started. But you do need more than what you’d use for a house.
- Industrial warehouse: $1.2M-$2.5M
- Net-lease retail: $800,000-$1.8M
- Medical suite: $600,000-$1.2M
- Self-storage: $1.5M-$3M
Most lenders require a 30-40% deposit for commercial property. That’s higher than residential, but the returns justify it. You can also use a 1031-style exchange (in Australia, called a ‘rollover relief’) to defer capital gains tax when selling one commercial asset to buy another.
Some investors start with a smaller asset-a single-tenant retail shop-then use the cash flow to buy a second one. Within five years, you could own three properties generating $200,000+ in net income. That’s not a side hustle. That’s a full-time income.
What’s the Catch? Risks You Can’t Ignore
Commercial property isn’t magic. It has risks-and if you ignore them, you lose money.
- Tenant risk - If your tenant goes broke (like a retail chain during a downturn), you’re stuck with an empty building. That’s why triple-net leases with creditworthy tenants matter. Check their financials. Avoid mom-and-pop shops unless they’re in a prime location.
- Illiquidity - You can’t sell a warehouse in a week. It takes 3-6 months. Don’t invest money you might need soon.
- Market shifts - A warehouse near a rail line is valuable today. But if freight shifts to drones or hyperlocal delivery hubs, demand could drop. Location matters more than ever.
- Regulations - Zoning laws, environmental assessments, and building codes are stricter for commercial. A warehouse might need fire suppression upgrades costing $100,000. Factor that in before buying.
The best way to reduce risk? Diversify. Own one industrial, one medical, and one retail. That way, if one sector slows, the others keep paying.
Where Are the Best Deals in Melbourne Right Now?
Don’t look in the CBD. The best commercial property deals are in the outer growth corridors.
- Dandenong and Dandenong South - Industrial hubs with high demand from logistics firms. Rents up 12% in 2025.
- Craigieburn and Broadmeadows - Growing populations mean more demand for retail and self-storage. Vacancy rates under 3%.
- Wyndham and Point Cook - New residential developments mean new medical clinics and pharmacies need space. Medical suites here are selling fast.
- Frankston and Cranbourne - Undervalued industrial assets with access to the port and freight corridors.
These areas aren’t glamorous, but they’re where the money is. Investors who bought in Dandenong in 2020 are now seeing 18% annual appreciation on top of 9% rental yield.
How to Start Without Making Mistakes
If you’re new to commercial property, here’s how to avoid costly errors:
- Work with a commercial specialist - Residential agents don’t know the difference between a triple-net lease and a gross lease. Find someone who only does commercial deals.
- Run the numbers yourself - Don’t trust the agent’s ROI estimate. Calculate net operating income: rent minus all expenses (rates, insurance, management, repairs). Then divide by purchase price.
- Check tenant credit - Ask for audited financials. A pharmacy chain like Chemist Warehouse is safer than a local café.
- Get a building inspection - Commercial properties can have hidden costs: asbestos, faulty wiring, outdated HVAC. A $2,000 inspection can save you $50,000.
- Start small - Buy one net-lease retail shop before jumping into a warehouse. Learn the process before scaling.
The goal isn’t to buy the biggest property. It’s to buy the one that gives you the highest net cash flow with the least risk.
Real Example: A $1.1M Industrial Warehouse in Dandenong
In 2023, an investor bought a 4,200 sqm warehouse in Dandenong for $1.1 million. The tenant, a packaging company, signed a 7-year lease at $9,500/month. Outgoings were triple-net, so the tenant paid all rates, insurance, and maintenance.
Annual rent: $114,000
Expenses (property tax + insurance): $8,000
Net income: $106,000
Return on investment: 9.6%
By 2026, the property is worth $1.5 million. Rent increased to $11,000/month under the lease terms. The investor now nets $120,000 a year. That’s $10,000 a month, tax-free (if held in a company structure). No day job needed.
That’s not luck. That’s commercial property.
Final Thought: It’s Not About the Property. It’s About the Lease.
A house with a great location is valuable. But a warehouse with a 10-year lease to a Fortune 500 company? That’s a financial instrument. It’s a bond with walls.
People think real estate is about bricks and mortar. It’s not. It’s about contracts, cash flow, and consistency. The property that makes the most money isn’t the fanciest. It’s the one with the longest lease, the strongest tenant, and the lowest maintenance.
If you want to make serious money from property, stop looking at houses. Start looking at warehouses, medical suites, and single-tenant retail. The money’s there. You just have to know where to look.
What commercial property type has the highest return in 2026?
Industrial warehouses and net-lease retail spaces lead in 2026. Industrial properties in Melbourne’s growth corridors like Dandenong and Craigieburn are generating 9-11% net returns due to strong demand from e-commerce logistics. Net-lease retail, especially pharmacies and supermarkets, offer stable 8-10% returns with tenants covering all outgoings.
Can I get a loan for commercial property with less than 40% deposit?
It’s rare, but possible. Some lenders offer 25-30% deposit loans if you have strong financials, a high credit score, and a creditworthy tenant. However, most banks still require 35-40%. Lower deposits usually mean higher interest rates and stricter terms. Avoid lenders promising 10-20% deposits-they often come with hidden fees or balloon payments.
Is self-storage a good investment in Melbourne?
Yes, especially in outer suburbs with rising populations like Wyndham, Broadmeadows, and Casey. Self-storage facilities have low operating costs, high occupancy (90%+), and recurring monthly revenue. A 10,000 sqm facility with 150 units can generate $180,000+ annually. It’s one of the highest-margin commercial assets available.
Should I buy commercial property personally or through a company?
Using a company or trust is usually better. It protects your personal assets if a tenant sues. It also allows you to claim more deductions and defer capital gains tax when selling and reinvesting. However, setup and ongoing costs are higher. Consult an accountant-this isn’t a DIY decision.
How long does it take to find a tenant for a commercial property?
It varies. Industrial and medical spaces often lease within 2-4 weeks if priced right. Retail spaces in high-traffic areas take 1-3 months. Office space can take 4-6 months. The key is pricing: if your rent is above market, it sits empty. Always check recent lease comps before listing.
