What to look for Despite the availability of more rationally priced options, investing in commercial real estate is most definitely not child's play. It requires forethought, research and planning:
* Investors need to establish the soundness of the location and its demand/supply dynamics. If they do not engage in sufficient research, they may end up buying into micro markets which have or will have high vacancies.
* They need to ensure that the economy, job market, future infrastructure development and population growth in the market is healthy
* They need to check the developer credentials, access to public transport and quality of property management in the project
* They need a knowledgeable real estate agent and a lawyer who can give them sound advice
* If they are investing in a retail store, they need to consider the frontage, foot-fall and the dynamics of the adjoining catchment
* Entrepreneurs who wish to buy commercial real estate for self-use should ensure that the amenities in the project that match their business needs
If an investor is looking at an income producing office asset, he should look at:
* The break-up of cash flows
* The vacancy factor
* Expenses such as maintenance, property tax and building insurance
* Lease term, lock-in period and expiry dates
* Long term capital appreciation potential
* Refurbishment, refinancing and repositioning potential
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