October 11, 2017 2 min to read
5 Factors to Consider Before Investing in Commercial Property
Category : Business
When you have idle money that you would like to see potentially earning more than what it can make just sitting in the bank, you might want to consider looking at the opportunity of investing in commercial property. This essentially means that you will be purchasing commercial structures that you intend to lease out to businesses over an agreed period.
If you are interested in this type of investment, it is always best to engage the services of a professional investment company that can advise you about opportunities that you might want to consider. To appreciate the value of engaging these companies, consider the following five intermeshed factors that they can evaluate on your behalf.
Most businesses rely on accessibility of their store’s location to its target market and make leasing decisions primarily on this factor. The “easy” way is to invest in places that already have a track record of successful leaseholders, but this will make said location more expensive to acquire. The elegance of the analysis is being able to predict which location will rapidly grow in terms of target market, which means you can buy the property at a reasonable price and benefit from the growing market by charging higher leasing rates.
Simply put, the bigger the property, the harder it will be to find a business who will lease it. On the other hand, the larger properties do attract more big-ticket clients that the smaller ones, clients who can and will spend a lot of money to renovate the leased property because of the size of the business they are in. Subfactors here would include the economic class of the location that would attract a particular kind of market “class”.
Consumer Spending Power
This does not just mean what the average consumer spends now. It also considers the future wherein the take home pay of the people comprising particular market rises or falls over a given period of time. This allows you to predict the timing of your investment.
Bank Interest Rates
Increasing and decreasing bank interest rates decrease and increase consumer spending respectively. You need to be able to predict with a reasonable degree of accuracy, future trends of interest rates to be able to project such things as consumer spending power.
Yours will not be the only commercial property available for lease in a particular location. Businesses canvass for the best deal possible given the location, which includes lease rates, contract length, provision for the escalation of rates during lease agreement renewal, etc.
All these factors need to be considered when making investments of this sort. Given the amount of money involved, it is always best to engage a trusted expert.