Did You Know? How to Evaluate the Quality of a Commercial Property's Location

Determining the Value of a Commercial Property’s Location

Location is an important attribute when evaluating a real estate investment property. How does an investor determine the quality of a location? Read on to find out…

 

You may have heard it before – location is the most important attribute to consider when determining the value of a commercial property. A prime location is crucial for a commercial real estate property due to its significant impact on a property’s success as an income-generating asset. A strategic location can enhance visibility, accessibility, and foot traffic, ultimately attracting more customers or clients. It can also influence the property's value, rental income potential, and overall profitability. Additionally, being situated in a desirable area can contribute to a positive brand image, fostering trust and credibility among stakeholders. Thus, investing in a well-located commercial property not only ensures present success but also promises long-term viability and growth opportunities.

So, what makes a good location? Well, it depends on the property’s type.

Here's a summary of what constitutes a good location for various types of commercial real estate assets.

Multifamily

  • Proximity to amenities such as parks, activities, entertainment/nightlife, shopping/dining, and personal/professional services

  • Low crime rates and safe neighborhoods/walkable streets

  • Strong job market and employment opportunities nearby

  • Easy access to public transportation and major highways

  • Desirable school districts for families

  • Community culture

  • Favorable demographic trends and population growth

Industrial/Warehouse

  • Proximity to transportation infrastructure like efficient streets, highways, ports, and/or railroads for logistics and distribution

  • Access to a skilled labor force in the surrounding area

  • Zoning regulations favorable for industrial operations

  • Availability of utilities such as water, electricity, and telecommunications

  • Large enough land parcels for industrial facilities and ample parking or loading/unloading space

  • Competitive operating costs including taxes, utilities, and labor expenses

  • Accessibility to suppliers and customers for streamlined supply chain management

  • Compatibility with neighboring land uses to minimize conflicts and maximize operational efficiency

 

What constitutes a good location depends on the type of property. A retail property benefits greatly from a busy street, while a multifamily property would be less desirable in a similar setting.

 

Retail

  • High foot or vehicular traffic with adequate signage and storefront visibility to attract customers

  • A densely populated area

  • Proximity to complementary businesses or anchor tenants to drive traffic

  • Accessibility with ample parking or convenient public transportation options

  • Excellent demographics such as a strong local economy, disposable income levels, education attainment, average age, and household size.

  • Presence of major retail corridors or shopping districts

  • Favorable zoning regulations for retail operations

  • Competitive rental rates and favorable lease terms in the market

Office

  • Proximity to transportation hubs and major highways for easy accessibility

  • Presence of amenities such as restaurants, cafes, and gyms to attract and retain tenants

  • Access to a skilled labor pool and proximity to universities or educational institutions

  • Favorable zoning regulations for office use and potential for future development or expansion

  • Availability of parking facilities or convenient public transportation options for employees and clients

  • Safety and security of the surrounding area, including low crime rates and well-lit streets

  • Quality of infrastructure, including reliable utilities, and telecommunications services

  • Quality of life for workers in surrounding neighborhoods/cities, including outdoor recreation, housing, commute, schools, safety, amenities, and more

  • Presence of other businesses and people to create synergies/collaboration/business opportunities

In conclusion, the significance of location cannot be overstated when it comes to assessing the value and potential success of a commercial property. A prime location offers numerous advantages, including heightened visibility, accessibility, and foot traffic, which ultimately drive profitability and enhance a property's value. Moreover, a desirable location contributes to a positive brand image, fostering trust and credibility among stakeholders. Whether it's a multifamily, industrial, retail, or office property, each type has specific location-related factors that contribute to its success. By carefully considering these factors and investing in well-located properties, investors can ensure both immediate success and long-term growth opportunities in the competitive commercial real estate market.

 
 

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