Commercial real estate investments can be in the form of multifamily properties, office buildings, commercial shopping centers, land or industrial property, etc. It is important for commercial real estate investors to be aware of the factors that impact the value of the property.
Here is a list of elements that affect the value of commercial real estate:
- Miscellaneous Factors: Some features that play a role in determining the value of the commercial property are location, transportation (access to bike paths, highways, freeways, mass transit systems, etc.), vehicle ingress and egress, hard corner exposure, traffic count and surrounding property.
- Interest Rates: If you are using credit to purchase commercial property, assess the rates of interest. Invest when credit is cheaper (lower interest rates) as this will result in lesser interest outlay and hence higher equity getting accumulated with time.
- Population And Demographics: Invest in commercial real estate after studying the population and demographic trends of the area you wish to invest in. Consider factors such as age distribution, birth, migration, and education levels in accordance to the kind of business property will be used for.
- Economic Outlook: Keep a tab on economic indicators that affect commercial real estate value. Examples of such economic indicators are household savings rate, job growth, real GDP, unemployment rates, wage growth, etc.
- Supply And Demand: As per the laws of demand and supply, when demand is more than supply, chances are that the value of a property will escalate and vice-versa. So before investing, ensure there is enough demand to support your commercial investment and yield high returns.
- Size And Facilities: In order to stay relevant and valuable, the commercial property should provide tenants with amenities such as co-working office space and other features that cater to their demands.
- Market Performance: The performance of the commercial real estate market is influenced by the economic outlook, zoning and tax laws, population, demographics and other factors. Invest in municipalities that has favourable norms for business.
- Branding: For commercial real estate to do well in terms of lease renewal, net property operating income, cash flow, and capitalization rate, work on creating a great brand. This can be done by enhancing the service level by investing in the latest exterior finishing, landscaping, an attractive and well-maintained parking lot, etc.
- Potential For Redevelopment And Renovation: Commercial property with the potential for redevelopment has a higher value as it can be redeveloped to suit the changing demand of renters and market trends. A buyer should also have the option of renovating the property and adding to its value by using creative leasing strategies, professional property management services, updating the property, etc.
Contact the agents at John Reider Properties to understand the factors that affect the value of a commercial property. The agency offers a variety of services to commercial real estate investors. For further details on commercial real estate value factors, visit us at 455 E. Central Texas Expwy Suite 101, Harker Heights, TX – 76548. You can also contact (254) 699 – 8300.