Book Review > Good Commercial Sense

Good Commercial Sense is an introductory text covering commercial property investment in Australia. The author, Karina Barrymore, has completed this offering as a formative sequel to her popular guide on investing in residential property (The Power of Property). As Peter Verwer, from the Property Council of Australia, suggested, this is a “practical and clearly written guide” for prospective investors. However, it is important to note that this book has been designed as a primer for such investors, rather than an in-depth technical manual for seasoned professionals.

Barrymore has built a financial journalism career spanning more than 25 years, including experience writing for the Herald Sun and the Australian Financial Review. Additionally, she has vested interests in two residential properties and one suburban office building. I somewhat expected her commercial property investments to be more ubiquitous, but in retrospect, I believe her journalistic experience is equally appropriate for the purpose of this text.

Good Commercial Sense is a very easy read. In terms of workload, it is a small paperback containing 260 pages of relatively large type. As for the subject matter, the concepts are kept lucid and are often related back to more common topics, such as residential property investing. The tone is quite conversational and Barrymore has aptly decided to use broad strokes to cover as many high-level concepts as possible (while not straying from the book’s purpose). The result is a well-researched briefing on the commercial property market and commercial property as an asset class.

Even though this text does not supplant those with more technical detail, it does an excellent job of keeping statistically-minded readers interested. For example, it states that commercial property, as an Australian asset class, delivered a total return of 15.97% in 2006 and 10.50% over the past ten years. Also interestingly, Barrymore specifies the characteristic performance differences between commercial property classes; which include: retail, office and industrial. She stresses that although total returns across these classifications are similar, changes in income and capital gain trends are apparent. For example, while the majority of industrial property returns are based on income, CBD office buildings in Australia actually deliver a major capital gain return.

On a more negative note, one of the statistical references used by Barrymore had me questioning her understanding of risk. On numerous occasions she concluded that commercial property is less risky than almost every other asset class because the measured long-term price volatility is very low. I personally believe this to be a product of an illiquid market rather than exclusively the asset class’s risk. Additionally, volatility measures do not account for tenancy risk, which I believe is the primary risk in commercial property investment. Other than this though, I believe the remainder of the book’s ideas to be quite pertinent.

One of the characteristics of this book that is really refreshing is that it has an Australian focus. That means that any discussion about legislation, booming cities, trends and performance, is directly relevant to Australian readers. Equally refreshing is that the book is “hot off the press”, so not only are the statistics up-to-date, by Barrymore’s view of the market is au courant. Considering Good Commercial Sense has all of this to its advantage, I would have liked to see more real-life examples. This may have included more commentary on our major cities or case studies on actual commercial property investments. Nonetheless, readers based in Australia will welcome the book’s relevancy.

In summary, I believe this book easily achieves its purpose by educating prospective investors on the Australian commercial property market. Its wide scope and broad coverage provide an excellent overview for readers planning to enter the market and those whose participation is incipient. While personally I was expecting a little more detail, I believe the target audience will greatly appreciate Barrymore for sharing her extensive experience. As she concludes, and I agree, commercial property investment makes Good Commercial Sense.

Rating: 3.5 (out of 5) on the Investor’s Publication Barometer (IPB).

Todd Sullivan is a member of the AIA.