If you are thinking about investing in retail commercial real estate like shopping malls, you need to know the basics of how this industry works to see a return on investment. Retail commercial real estate differs greatly from commercial real estate investments and it’s important to make sure and get the facts you need before you start out.
Essential Facts for Retail Commercial Real Estate
Of course, the basics of investing in properties that specialize in retail are similar to investing in any kind of commercial property. For example, you need to have tenants who are running profitable businesses so that they can pay their rent in a timely fashion.
What are the special characteristics of investing in retail commercial real estate?
Importance of Retail Real Estate Location
First of all, check out the location of the commercial property. Is it well serviced by local transport and is there easy access from main transport routes? Is the property easily found by consumers traveling there for the first time?
Check Tenant History
If a potential retail tenant is coming from another property, it’s advisable to check out their occupancy history. Try to find out if the previous landlord had problems with late rent payments, frequent shop closures, or bringing in the wrong type of business.
Define Retail Lease Conditions
One of the most important factors to make sure that you have a smooth and workable arrangement with all of your tenants is to clearly define lease conditions. Most points on a commercial property lease are up for discussion. A lease that works for both parties will help you to see a healthy return on your investment. Make sure and define the length of the lease, permitted use of the rented space, incentive alternatives, and payments for unused space.
Business Type
It’s also important for you, as a landlord, to know the business type of the retail tenant. Ideally, in a large retail commercial property, you need a variety of businesses to attract the widest possible demographics of people. You should define “permitted use” for the rented space and always make sure that all tenants continue to operate within the realms of their business type.
