One of the most important aspects of commercial real estate investing is finding the right property. And location is a major factor in identifying that property. Location includes many factors as you will see below.
For a retail property especially, it is a big key to its success. A good location attracts tenants – and their customers. The result for you as the property owner is the ability to charge higher rents and to create a higher value for the property.
The features – and benefits – of a good location are:
1. Close to major streets and freeways – This makes driving to the property easy for customers, as well as making the property visible for your tenants and potential clients.
2. Signalized corner – When cars stop at the traffic light, people in the cars have time to see the stores. This also slows down traffic thus increasing the properties visibility.
3. On or close to a busy street with high traffic volume – High traffic is important to the tenants. Always check commercial property listings for CPD (cars per day) or ADT (average daily traffic) information. Also, review this information and compare it to other traffic corners in the area or region. In addition, find out if the counts are going up or down over the last couple of years.
4. Area – Check demographics to make sure the property is located in a growing area with population growth, not in a declining neighborhood. Demographics can also tell you the household income, racial makeup, daytime population, and the number of households in the area. Check to make sure that the tenants match the demographics. An example would be if there is a McDonald’s on the property, you want to make sure that the demographics show a lot of families in the area.
5. Near anchor tenants – Anchor tenants are the major retailers like Home Depot, Best Buy, Wal-Mart, grocery stores, and drug stores. Tenants located close to an anchor benefit from their traffic. Also. make sure that the type of anchors line up with the mix of the other tenants in the property. An example would be that grocery stores tend to bring daily traffic which would be good for fast food tenants such as Subway or a Wal-Mart might tend to bring a customer looking for bargains, so other tenants that are discount oriented should do well in this type of project.
6. Easy ingress and egress – If it’s hard to make turns into the property or there are not enough entryways and exits to easily get traffic in and out of the property, the property is less attractive to tenants because they feel their customers may choose another destination. An example of hard ingress, would be if a property is in a mid block location and there is not a left turn lane into the property and the car has to go past the property and then do a u-turn to come back to the property or you can’t make a left turn out of the property, as you might have to exit right and go down a couple of blocks and do a u-turn.
7. Signage – Good signage – especially a large monument sign in front of the property – makes it easier for customers to find the stores. Also, there should be a uniform signage program for the store front signs. The program should be such that the tenants signs are highly visible from the surrounding streets or even freeways. The signage program should also include that the signs should be illuminated.
8. Parking – Plenty of spaces and a well-lighted parking lot are important. A parking ratio of 4 or 5 parking spaces per 1,000 sf leasable space is preferable. If there is only a food tenant on the parcel parking needs to be greater. The parking lot also needs to be properly maintained with minimal potholes and cracking and with properly marked spaces and drive aisles.
9. Appearance – Properties that are well maintained – good landscaping, clean, well-lighted and buildings in good condition – attract the most customers for the tenants. If you are looking at a property that is not well maintained or have a clean appearance, make sure that you put the costs to upgrade the property into your purchase costs. A good appearance also attracts potential tenants.
One of the tenets that you always hear about when real estate is discussed is location, location, location. As you can see, there are several things that make up a good location. As you review a property you can use the above for the pluses and minuses of a sites location.
As I say throughout my blogs, if I may be of assistance with your real estate questions please contact me. My way of giving back is to give away my knowledge. Thank you for reviewing this blog.
