If you are walking through a busy section of town, surrounded by shoppers, you may begin to wonder about the value of owning retail real estate. After all, in a high-performing neighborhood, it may seem like retail property would be an extremely reliable investment, one with steady cash flow that could easily pay for itself in time.
In practice, retail real estate can indeed sometimes be all it’s advertised to be. However, it takes careful consideration and sound investment decisions before determining whether this is definitively the case.
Read on to learn a little more about the investment value of the retail property.
Location Is Everything
Retail real estate is almost always dependent on in-person foot traffic for good business. Consequently, where a given retail space is located is of prime importance in understanding the property’s value as an investment.
How has business been in the given neighborhood traditionally? Is the neighborhood improving, or on the decline? Are there any factors — new construction, changes to permitting or zoning laws, or anything else — that might affect the future value of a retail location? Questions like these are extremely essential to understanding the value of a given site.
Reliable Cash Flow
Commercial property can often be an attractive investment because commercial leases tend to be longer and more stable than residential leases. That said, you will want to ensure that any property in which you consider investing has reliable tenants. Have the current businesses been present in that location for a long time? Financially, are they performing well? It is vital to understand how reliable cash flow will be at a given retail location.
Finally, it is essential to know about the condition of the property in which you are investing. A property that has been well-maintained for years can make a lovely ownership opportunity, requiring only limited upkeep.
However, sometimes retail sites have been neglected over the years, for one reason or another. Purchasing a retail real estate site and learning about plumbing, electrical, or other issues can be a major hassle. You will be on the hook for making necessary repairs, and keeping tenants happy. Thoroughly investigating any problems before purchasing is vital.
Ultimately, the retail property can make a great investment — but circumstances are important. Be sure to do all necessary legwork prior to a purchase to ensure that a given retail location is worth your time and investment.