Commercial Property Investment Case Studies: High-Yield Success Stories in 2025

Last updated: May 14, 2025

In the latest episode of The Property Nerds podcast, hosts Arjun Paliwal (CEO at InvestorKit) and Chris (Head of Commercial at InvestorKit) dive deep into two exceptional commercial property investment case studies. These real-world examples showcase how strategic commercial property investments can deliver outstanding returns in today’s market.

When Is the Right Time to Transition from Residential to Commercial?

Before exploring the case studies, Arjun outlines three common scenarios where investors typically transition to commercial property investment:

1. Portfolio Diversification Stage – Investors who have built substantial residential portfolios and want to transition to cash-flow focused assets. Ideal candidates have approximately $2+ million in purchasing power with borrowing capacity or cash.
2. Consolidation Phase – Typically investors aged 45-60 approaching retirement who are selling multiple residential assets to consolidate into higher-yielding commercial properties.
3. Self-Managed Super Fund (SMSF) Route – Individuals with combined household super balances of $600,000+ looking to diversify their retirement strategies with commercial property.

Case Study 1: Mercedes-Benz Tenanted Industrial Facility

Property Overview:

• Location: 9km from Brisbane CBD
• Property Type: Modern 1,300 square meter warehouse and office facility
• Tenant: Mercedes-Benz (blue-chip tenant)
• Purchase Price: Early $3 million range

Key Investment Highlights:

• Lease Structure: 3×3 lease (3-year initial term with a 3-year option)
• Tenant History: Mercedes-Benz has occupied adjacent property for 20 years
• Annual Return: $201,000 net return
• Yield: 6.3% net yield
• Rental Increases: 3.5% fixed annual increases
• Tenant Quality: Premium multinational company with expanding EV business
• Outgoings: Tenant pays 100% of outgoings including land tax, insurance, and management fees

Market Analysis:

• Vacancy Rate: 1.7% (extremely tight for commercial property)
• Market Comparison: Weaker tenants in brand-new facilities were transacting at 5.5-6% yields in the same area
• Financing: 70% LVR loan at 6.47% interest rate
• Cash Flow: $56,500 annual positive cash flow from year one (approximately 5% cash-on-cash return before depreciation benefits)
• Historical Capital Growth: 6.8% average in the area for industrial property over 20 years

What Could Have Gone Wrong:

The due diligence process revealed the need for Mercedes-Benz headquarters overseas to sign the lease renewal. This international documentation process could have caused delays in settlement timing. The professional team managed the process by working closely with all parties to maintain realistic timelines.

Case Study 2: High-Yield Mixed-Use Asset in Gladstone

Property Overview:

• Location: Light industrial precinct in Gladstone, Queensland
• Property Type: Mixed-use asset with industrial and medical office components
• Tenancy Profile: 100% leased across 10 different tenants
• Size: 1,800 sqm net leasable area on a 3,000 sqm site
• Purchase Price: $2.745 million (negotiated down from $2.9 million asking price)

Key Investment Highlights:

• Yield: 9.07% net yield
• Annual Cash Flow: $120,000 net cash flow
• Tenant Diversity: Mining, medical, and light industrial tenants
• Unique Structure: Head lease arrangement with additional sublease income potential

Head Lease Advantage:

The primary tenant operates a forklift license business and has taken a head lease for $249,000 net while subletting spaces to other tenants at higher rates. This creates a win-win situation:

• The head tenant effectively operates rent-free while generating additional income
• The investor receives a secure, high yield
• Future upside potential of 12-15% yields if subleases were directly managed

What Could Have Gone Wrong:

Building inspections revealed minor roof issues and stairs requiring replacement, with repair costs estimated at $35,000 for the roof and $5,000 for the stairs. Without proper due diligence, these issues could have derailed the investment. The professional team arranged for repairs and appropriate insurance coverage.

Success Patterns in Commercial Property Investment

Chris identified several patterns that contributed to these successful investments:

1. Strong Tenant Covenants – Reliable cash flow and lower vacancy risk
2. Above-Market Yields – Building in upside from day one
3. Low Vacancy Areas – Creating future flexibility and rental growth
4. Supply-Constrained Markets – Driving long-term capital growth
5. Understanding Complex Lease Structures – Seeing opportunity where others see complexity
6. Professional Support Team – From brokers to property managers

Key Takeaways for Commercial Property Investors

1. Look Beyond the Surface – The Mercedes-Benz deal showcased how understanding a tenant’s business plans (expanding into EVs) can provide confidence in long-term security.
2. Negotiate Based on Data – Even with attractive deals, there’s room for negotiation with the right market knowledge.
3. Due Diligence is Critical – Both cases required thorough building and lease inspections to identify and address potential issues.
4. Land Tax Advantage – In commercial properties, tenants typically cover land tax, providing significant cash flow advantages compared to residential investments at similar price points.
5. Cash Flow Benefits – Commercial properties can deliver day-one positive cash flow even in high interest rate environments.
6. Capital Growth Potential – Industrial properties in Brisbane have demonstrated strong long-term capital growth (6.8%) while maintaining attractive yields.

Final Thoughts

Commercial property investing requires specialized knowledge but can deliver exceptional returns when approached correctly. These case studies demonstrate how professional support can help navigate complex deals and identify opportunities that might intimidate less experienced investors.

If you’re considering commercial property for your portfolio and match one of the transition scenarios mentioned above, schedule a free consultation with InvestorKit.

Disclaimer: Past performance is not indicative of future results. Commercial property investing carries risks and professional advice should be sought before making investment decisions.

Want to learn more about commercial property investing? Subscribe to The Property Nerds podcast for regular insights and analysis of the Australian property market.