Key Factors to Check Before Investing in Commercial Property

A commercial buy isn't just "prime location" — the cleanest way to evaluate one is to score it on the eight levers below. Each lever is independently visible to anyone willing to do an hour of diligence.

Location and vacancy

Track the micro-market's vacancy rate. Under 5% is institutional-grade; 5-10% is buyable with discipline; over 10% is speculative.

Tenant covenant

Listed corporates and MNCs are the best counterparties. Small unknowns are the highest-risk tenants — credit-default risk and short tenure.

Lease structure

3+3+3 or 5+5+5 lock-in structures with 15% triennial escalations are the gold standard. Anything shorter is investor-unfriendly.

Security deposit

10-12 months' rent is standard. A deposit below 6 months signals a tenant in poor financial shape.

Interior fitouts

Tenants who invest in their own fitouts (typical Rs 2,000-3,000/sqft) stay longer. Verify who is on the hook for fitouts in the lease.

Builder reputation

Commercial property quality depends on the developer's specification discipline. Buy from groups with a clean delivery track record and limited concurrent projects.

Market rent vs in-place rent

If the in-place rent is meaningfully above market, the tenant will churn at lease end. Buy when in-place rent ≤ market rent.

Exit options

Is the location liquid enough that another investor will buy when you exit? Test by asking three local commercial brokers.