A Guide to Finding the Right Location for Your Retail Real Estate Investment
Selecting the ideal location for your retail real estate investment requires extensive research and some thoughtful consideration. If the property is located in an area that brings minimal foot traffic, you might not receive the ROI you’re looking for. When you find a great location, you can earn high returns that help you strengthen your entire investment portfolio and increase protection against losses. Here’s an in-depth guide on how to find the best location for your next retail real estate investment.
How Is the Local Economy Performing?
Before you invest in a commercial property, it’s highly recommended that you research the local economy to determine how healthy it is. Find out if businesses are staying in the area and what the unemployment rate is. It’s best to invest in a strong business location with good population growth.
There are many factors that indicate healthy economic conditions, including an improving job market, availability of great public amenities, reasonable property taxes, and accessible public transportation. Make sure to check how many local rental listings are available. If there are only a small number of retail listings, this indicates that tenants are moving into available rentals quickly.
Are There Any Structural or Environmental Problems in the Area?
If you believe that you’ve found an appealing retail location to invest in, it’s first important that you obtain certain property inspections to see if there are any unknown issues that weren’t disclosed. The results from these inspections will tell you if the property is worth investing in or if there are certain structural and environmental issues that could pose a problem.
Along with a standard inspection, you might also want to request inspections on:
- Internal electrical components
- Building code violations
- Sewer lines and septic systems
- Fireplace and chimney
There are numerous issues that can be identified during these inspections, which gives you the opportunity to determine if these issues are worth reconsidering the deal.
Is the Retail Property Situated in a High-demand Location?
You should also find out if the retail property is situated in a high-demand area. For instance, is there a university near the retail location where student housing is popular? If so, any retail location in that area would be in demand. The same is true if the property is located nearby public transportation and is key if you are looking for long-term gains.
Great locations allow you to ask for higher rents when compared to properties that are located further away from amenities. It’s possible that your investment will yield high profits if it’s located in a high-demand area.
How Is the Competition?
Another notable consideration involves competition in a specific radius. Are there many other retail buildings in the area? There’s a chance that too many competing rentals could make it more difficult for you to appeal to possible tenants.
However, the popularity of the destination also determines how important the presence of competition is. When a retail building is situated in a downtown area that receives a large amount of foot traffic, it’s unlikely that there will be too much competition regardless of how many retail stores can be found in the area.
Make sure that you find out exactly how much tenant interest is possible before you make a bid on a retail property. You can talk to local realtors and other retail investors to obtain this information.
Additional Factors to Consider
There are additional factors that should be considered while you’re searching for the ideal retail investment location. For one, make sure that the job market, population growth, and future infrastructure development are currently healthy. Also look at the quality of property management providers in the area to identify if your investment will be a sound one. Consider the local building codes to make sure that the property you want to invest in would be suitable for possible tenants.
Investing in retail real estate gives you the ability to bring in consistent rental income and diversify your portfolio. Among the most important aspects of any real estate investment is the location. Choosing the right location can be the difference between a good deal and a bad one. The research you conduct during your search should give you actionable data that simplifies the decision-making process.