What's a good yield for commercial property?

In 2025-26, typical net yields are: CBD offices 5-7%, suburban offices 6-8%, retail 5-7%, industrial/warehouse 5-7%, medical 5-6%. Yields vary significantly by location, tenant quality, and lease terms. Lower yields = lower risk (better tenant/location). Higher yields = higher risk (weaker tenant/location).

How does commercial property tax work?

Rental income is taxable. You can deduct interest, depreciation (building at 2.5% for eligible properties), outgoings, management fees, and other expenses. CGT applies on sale (50% discount if held 12+ months). GST applies to commercial property sales and rent — unlike residential.

What's the difference between commercial and residential investing?

Key differences: higher yields (5-8% vs 2-4%), longer leases (3-10 vs 1 year), larger deposits (30-40% vs 20%), longer vacancies (months vs weeks), GST applies, depreciation deductions can be higher, and tenant quality matters more than location. Commercial is higher return but higher risk.

Commercial Property Yield Calculator

AI + Live Data

Calculate the rental yield and return on investment for commercial property. Compare net yield, cap rate, and cash-on-cash return.

Free to useNo data storedReal-time dataAI insightsUpdated: February 2026

Commercial property can generate significantly higher yields than residential — typically 5-8% net compared to 2-4% for residential. But commercial investing also comes with higher risk: longer vacancy periods, more complex leases, and larger capital requirements. This calculator analyses your commercial property's gross yield, net yield, capitalisation rate, and cash-on-cash return to help you evaluate whether the investment stacks up.

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Real-World Examples

Office Space — Net Lease

A small office suite purchased for $850,000 with $45,000 in purchase costs. Net lease at $65,000/year. Loan: $550,000 at 6.5%.

Gross yield: 7.65%. Net yield (cap rate): $65,000 ÷ $895,000 = 7.26%. Annual loan interest: $35,750. Cash flow (rent - interest): $29,250/year. Cash invested: $345,000. Cash-on-cash return: 8.48% — significantly better than residential.

Retail Shop — Gross Lease

A retail shop for $1.5M. Gross rent: $120,000/year. Landlord-paid outgoings: $25,000/year.

Gross yield: 8%. Net income: $95,000. Net yield: 6.33%. While the gross yield looks attractive, the outgoings reduce it meaningfully. Consider negotiating a net lease on renewal to transfer outgoings to the tenant.

Frequently Asked Questions

Glossary

Cap Rate (Capitalisation Rate)

Net operating income divided by property value. Measures the return independent of financing. Also called net yield in Australian markets.

Cash-on-Cash Return

Annual cash flow (after debt service) divided by the total cash invested (deposit + purchase costs). Measures the return on YOUR money, not the property's total value.

WALE (Weighted Average Lease Expiry)

The average remaining lease term across all tenants, weighted by the rental income each tenant contributes. A longer WALE means more secure income.

Net Lease

A lease structure where the tenant pays some or all of the property outgoings (rates, insurance, maintenance) in addition to base rent. Reduces the landlord's expense risk.

Related Tools

Business Loan Calculator

Calculate commercial mortgage repayments.

Capital Gains Tax Calculator

Calculate CGT when selling commercial property.

Negative Gearing Calculator

Assess tax benefits if the property is negatively geared.

How to Use

1Enter the purchase price of the commercial property.
2Input the total annual rental income from all tenants.
3Add annual expenses that aren't recoverable from tenants.
4Include purchase costs (stamp duty, legal, inspections).
5If financed, enter the loan amount and interest rate.
6Select the lease type — this affects who pays outgoings.

Key Information

Gross yield = Annual rent ÷ Purchase price. Net yield = (Annual rent - expenses) ÷ (Purchase price + purchase costs).
Cap rate and net yield are used interchangeably in Australia — both measure return net of expenses relative to value.
Commercial property typically requires 30-40% deposit (vs 20% for residential).
Commercial leases are usually 3-10 years with annual rent reviews (CPI or fixed %).

Pro Tips

Focus on NET yield, not gross — a high gross yield with high outgoings might be worse than a lower gross yield on a net lease.
Net leases (tenant pays outgoings) are preferred — they transfer expense risk to the tenant and give you more predictable income.
Check the WALE (Weighted Average Lease Expiry) — longer WALE = more income certainty. Banks also prefer longer WALE.
Location matters less than the tenant's covenant (quality) in commercial. A blue-chip tenant on a 10-year lease is very secure.

Avoid These Mistakes

Using gross yield to compare properties — always compare on a net yield / cap rate basis.
Not budgeting for vacancies — commercial vacancies can last 6-12 months vs 2-4 weeks for residential.
Ignoring tenant quality — a cheap property with a weak tenant is a liability, not an asset.
Not accounting for the higher entry costs — stamp duty on commercial is higher, plus due diligence costs more.

Disclaimer: This calculator provides estimates only and should not be relied upon for financial decisions. Interest rates, fees, and policies change frequently. Always verify information with lenders directly. This is general information, not personal financial advice. Consider seeking advice from a licensed mortgage broker or financial advisor.

Last updated: February 2026