Top Factors for Investing in Commercial Real Estate

Commercial real estate is a broad industry that comprises everything from single stores to mammoth shopping malls. This includes warehouses, office buildings, industrial buildings, multiple-use buildings, retail buildings, hotels etc.

In case you are planning to invest in commercial real estate, like commercial property in Mohali, you should do due diligence and consider the following factors:

1. Location

The best commercial property is one that is located strategically. The location of the property will determine its accessibility and its attraction to high-end tenants. The property's value will be influenced negatively or positively by location-related variables. Therefore, it is good to conduct comprehensive research on the following aspects for the progress of your decision to invest:

• Accessibility of location by different means.
• Level of competition from similar properties
• Location of the suburb
• Zoning number
• Nature of businesses around the property

It is the location which determines the worth of the property; in case a building or land is located in a central business place in the city, it will be worth much more than property located anywhere else in the city.

2. Multiple uses

Yet another feature of a commercial property is that it serves multiple uses in contrast to residential properties used mostly for living. Therefore, this property can be utilised for opening retail shops, building warehouses, hospitals, shopping complexes etc. The analogy is that while residential property seems like a desktop computer with minimal uses, commercial properties such as freehold office spaces are like smartphones with several uses.

3. Parking space

It is also vital that a commercial property must have adequate parking space since the lack of this feature can attract fewer customers, which will impact the fortunes of the business. A related analogy is that a commercial property without adequate parking space is like a smartphone without a charger.

4. Excellent history

Before buying any commercial property, it is good to conduct research on its history or past performance as well as those of similar projects inside that locality. Consider the following aspects:

• Put priority on yield and capital growth performance in the past few years and months.
• Examine current trends to aid you in gaining a clear picture of the weaknesses and strengths of the property.
• Such actions will aid you in projecting tenant profiles, future trends and other vital information for making sound decisions for investment.

5. Sufficient infrastructure

All suburbs and cities feature a distinctive set of infrastructure fashioned for supporting commercial real estate growth. But particular government strategies are highly instrumental in determining the type of infrastructure which goes into specific locations. The development of the needed infrastructure, which impacts the value of the real estate, comprises hospitals, schools, airports, rails, buses, roads etc.

Therefore, it is good to prioritise properties with close access to such infrastructure for a valuable portfolio of commercial real estate. Naturally, it is such properties that experience high demand.

6. Financial concerns

One must weigh financial factors that impact investment in commercial real estate. These include the following:

• Before sourcing funds, request a report for a credit review of the property you desire to purchase.
• When seeking funds from financiers and financial agencies, poor credit scores can be challenging.
• Property being considered for investment must have a solid financial standing. This concern includes an appraisal of the property, down payment, and coverage ratio, all of which impact the approval of the loan.

7. Terms of lease

Another factor is the terms of the lease of the asset you desire to invest in. An attractive property is that which has lease terms which enable recovery of investments and earning of profit. Some issues as regards this are:

• What is the CPI of the property?
• What is the structure of the terms?
• Is it possible to renew the terms?
• Does the property feature special government approvals regarding medical facilities, centres of child care, etc.?
• What is the nature of agreements with tenants who set up their very own partitions on the property?

All such aspects have a tremendous impact on your bottom line. A professional in commercial real estate can aid you in considering each element and answer any critical questions that arise through the decision-making process.

8. Security of locality

Profits from a commercial real estate investment also depend on the level of criminal activity in the location. No person desires to operate in areas which feature break-ins and crime. Profitable investments are possible only in safe and sound locations. The proximity of areas to police facilities can improve the demand for them.

In sum, while buying a commercial property, you should not rush in with the fear of losing out on a good offer. Instead, wise investors will always take time and do extensive research, noting the above factors and tips to gain good results.