its more risk basically. the yields are better, but CG might not be as great. you're basically tied to the financial success of your tenant, cause if they go broke and stop paying rent you get put in a tricky situation.
they are usually valued using Discounted Cash Flow (DCF), theres plenty of books on DCF about.
theres some information about syndicates and so on here
http://www.gal.com.au/
and this book thats been mentioned on the forum here
http://www.moneybags.com.au/default.asp?d=0&t=1&id=4731&c=0
www.finsia.edu.au has a unit on commercial property investing in its postgrad course. you can buy just the notes for a unit, but they are a few hundred dollars, from memory.
a while back i was looking at buying a building that consisted of a restaurant and 2 residential apartments. due dilligence revealed it was operating at about 3 x the capacity it was approved for, as it had been approved as a cafe and subsequent owners made it into a full restaurant. it needed a reasonable amount of work done (new roof, needed rewiring) and i didnt feel comfortable with it as i felt like i would be getting in over my head.
the lease was a 5 year lease with an option to renew for another 5 years, which had been taken. one of the apartments was rented out to the resturants owner and chef, the other to some guys who hadn't had a rent increase in about 7 years it seemed (hmm, not bad if you can get it). it passed in at auction and im not sure who bought it. i had to go away for work for a few months, but my mother (who likes her food) kept an eye for any news on it.
turns out the chef had a good head for business and made his money establishing resturants and selling them as turnkey businesses. he sold the resturant to a couple, presumably after the sale of the building had gone through, and the 5 year option on the lease taken. however, in a genuine tradgedy, the new resturant owners were killed in a car crash only a few days before they were to have their opening night. wow
the guy who established it was going to stay on for a while to train them in running it, and i really have no idea who now owns the resturant and who runs it etc. it is very sad what happened to the people who bought it, but i guess you have to realise things are more risky with commercial, and you're closely tied to your tenant. if you can handle that risk, more power to you, but i think ill stick to listed property trusts and residential till i have deeper pockets.
i guess if you do have deep pockets/appitite for risk, the returns are better. a commercial lend will usually be on an LVR from 50% - 75%. with residential it seems you make your money when you buy, but with commercial it seems to be when you sign the lease. the terms of the lease are very important, and form the basis of the DCF valuation (rents + forecast increases, less expenses basically). also, lawyers and agents fees generally seem to be higher, as its more complex overall.