You’ve heard the old adage before, “Location, location, location.” It can be more important than the condition of the property itself. The location of the commercial real estate asset can dictate whether or not the property succeeds or fails. Geographic areas improve and degrade over time as residents move in and out and the economy expands and detracts.
When investing in a commercial real estate asset there are many factors to consider concerning location. There is the “Macro” location and the “Micro” location. The “Macro” location is the geographic location as it pertains to the country (or world). For example, “Macro” locations are the Southeast or the Atlanta metro area. The “Micro” locations are the neighborhoods and areas within the “Macro” locations. Here are some tips to help you choose a location at the “Micro” level.
1. What is Moving into the Area? – Specifically what businesses or organizations are moving into the area? Is the area full of dive bars or trendy restaurants? Are cool new things moving in? A stadium perhaps… (Hint: Braves) or a park project (Hint: Atlanta Beltline.) Artsy and trendy things are usually good indicators of gentrification, which tends to increase property values. Conversely, check on what is moving out of the area.
2. Check Historical Prices – History is never an indication of the future but some useful information can be obtained from historical data. Look at the prices for rent and sales and compare them to current prices. If you plan to hold the asset and use it as an income producing property make sure the rent you can get will justify the price of the asset. Is there a similar area nearby that has recently become red hot? See how your target area compares. If you plan to flip the property in a few years, does your target area have what it needs to improve?
3. Look at Current Occupancy – Call around and get an idea of how much commercial space is available. If there is a lot of commercial space available, it may not be a desirable area, however this could mean the asset can be purchased at a discount allowing for a higher yield when you sell. Depending on your strategy and whether it is long-term or short-term, will dictate how you perceive these numbers.
Obviously there is so much more to consider, however these tips will help you get started. It is important to incorporate your expectations and time frame into your investment strategy. Need some advice or are you interested in learning about one of our commercial real estate opportunities? Please contact us. We have been helping our investment partners achieve great returns in the Atlanta area for nearly 80 years.
Thank you for explaining that you should look into what is moving into the area to help with choosing a location to invest in. My sister is thinking about investing in real estate. I’ll have to pass this on to her so she can be sure to use it for her investments.