10 Tips For Finding the Best Commercial Real Estate Location

Choosing the best location for a commercial real estate investment takes thoughtful consideration. Properties in non-prime areas might not yield the ROI investors ...

10 Tips For Finding the Best Commercial Real Estate Location Close
Page Summary

10 Tips For Finding the Best Commercial Real Estate Location

Posted by Gary Ashton RE/MAX on Thursday, October 7th, 2021 at 11:23am.

Ask These Questions Before Deciding on a Commercial Real Estate LocationChoosing the best location for a commercial real estate investment takes thoughtful consideration. Properties in non-prime areas might not yield the ROI investors are looking for. Identifying the right location for a commercial real estate investment can mean the difference between earning or losing money. Keep reading to find six questions you should ask when choosing the place for a commercial real estate investment.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

Is the Property Located in a High-Demand Area?

The first step is to consider the economics of the local rental market. Is it in a prime location that's high in demand? For instance, is there a college nearby where housing is highly sought? Is it near public transportation that boosts property value? Prime locations can net higher rents than properties located farther from amenities or in more secluded areas. Additionally, properties located in a distant place appealing to only a select number of tenants or businesses looking to rent space might not yield the desired ROI. However, ones found in a high-demand area have a better chance of being profitable.

What's the Rental Competition in the Area?

Competition is a huge consideration. Before investing in a commercial real estate purchase, investors should meticulously check out the competition in a specified radius. Are other rentals in abundance? Would it be more strategic to buy in an area where good rental opportunities for tenants are sparse? Determining the level of tenant interest in an area is critical before making a bid on a property. To help do this, talk to other commercial investors and local realtors who are well-positioned to provide good information to help evaluate if an area would be a wise investment.

What Does the Local Economy Look Like?

Before investing in a commercial property, it's a wise strategy to examine what the local economy is like. Are businesses steadily leaving the area? Is unemployment rising or falling? Are local businesses booming? Ideally, investors want to put money into locations where people and businesses are moving in, not out. Good indicators a local rental market is hot with a more robust economy include the availability of good public amenities, a growing job market, accessible public transportation, future development plans, and favorable property taxes. Additionally, check the number of local rental listings – if there are few listings, it means rentals aren't languishing, tenants are scooping them up quickly.

What are the Local Regulations?

Before investing in a property, it's essential to research all local regulations. This includes taxes, permits, and zoning. Many areas have stringent zoning laws. Even if the ideal location is identified, it might not be zoned for plans the investor may have for the property, rendering it unavailable. Can it be rezoned, or can permits be obtained? Investors should always be looking at the future for potential growth opportunities and expansions. This wouldn't apply in all properties but is a consideration depending on the investor's goals.

Is the Area on the Rise?

Investing in a commercial property is a considerable commitment and directly affects the bottom line if it doesn't go well. It's essential to consider the current condition of the neighborhood and if the properties are competitively priced. Are prices very low for a reason? For instance, is the area falling into disrepair, or is it being revitalized? (the latter may turn out to be a good bargain, whereas the former could result in a net loss).

Are there any Environmental or Structural Issues?

Although there are several differences between commercial and residential real estate, they have one thing in common: inspections. As with purchasing any property, investors should have a meticulous inspection done. A standard inspection is essential, but also consider performing other types of inspections. Additional inspections to consider include internal electrical components, building code violations, mold, pests, radon, sewer lines, septic systems, fireplace and chimney, lead paint, HVAC, and asbestos. Unfortunately, sometimes ground or water contamination lurks beneath the surface of what otherwise looks to be a great opportunity, or the home itself contains serious problems that might not be easy to rectify.

Other Tips for Choosing a Commercial Real Estate Location

To identify the right location to invest in:

  • Enlist help. Speak with a real estate agent specializing in commercial real estate and see if they can help identify any issues that might be present that aren't as obvious to most people, but an expert would immediately notice.
  • Be selective. Don't jump at the first opportunity; view several properties, observe their comings and goings, and research each possibility before making a final commitment.
  • Talk to other investors. Talk to other investors and ask about the space, the neighborhood, and any further pertinent details that would affect a rental's location to see if it would be a smart deal to make.
  • Have backup options. If a first choice becomes unavailable, be sure to have other backup investment options on the backburner to explore if a deal falls through or turns out not to be an intelligent investment.

Success in Commercial Real Estate Is All About Location

Finding the right commercial property takes time, but asking the right questions and doing sufficient research, increases the probability that the right choice of location will be made. As the old saying goes, it's all about location, location, location! Choosing the wrong one can turn out to be a disaster, but the right one can yield great rewards, along with a terrific ROI.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

 

Gary Ashton

The Ashton Real Estate Group of RE/MAX Advantage

The #1 Real Estate Team in Tennessee and #2 RE/MAX team in the World!

Leave a Comment