In this installation of CRE 101, we’ll look at how location affects ROI. Location is one of the most important factors to consider when investing in any type of property. Approximation to amenities and aesthetics can greatly increase the amount your commercial properties can make. From beautiful scenery to transportation hubs, what’s around your property can drive its value.
In any type of commercial real estate investment, you need to be careful where you buy. Knowing what type of property you are looking to buy is vital when considering where to buy, so let’s take a look at some of the most important factors of location, and which property types are most affected by each one.
Proximity to schools and colleges
How close the property is to schools and other education hubs, be it colleges, universities or even preschool centers, is an important factor to consider when choosing a property. It’s especially important if you’re looking to buy housing to rent to tenants.
Studies have found that as more money is spent on education in a given area, property values tend to increase. This is because families – and those looking to start one – want to be near schools for their kids, and this means they will pay more for it.
College towns especially carry above average rental prices and have elevated storefront activity.
However, proximity to schools and colleges can also affect your income if you own other types of commercial property. If you own a mall for example, you are likely to see a lot more foot traffic through your stores due to kids heading there after school, or as a compounding effect of the families wanting to live near both a school and a shopping center. The effect also goes the other way, as rental income can increase from a domestic property if there is plenty of CRE (like shopping centers) relatively nearby, with future CRE development also worth considering.
Transport links
Transportation hubs, like bus stations, train stations, and even airports, can also have a dramatic effect on your property income. If you have property with plenty of transport links nearby, you can expect more income due to people appreciating the amount of connectivity around them. This same effect tends to be in play for airports that are within a short drive from the property, but if the distances are too short you might see decreases in income due to things like the flight paths being right above the properties, causing unwanted noise pollution.
For retail real estate, transport links such as bus hubs and subway stations mean more people can reach your store with ease. This will drive more foot traffic through your doors, and if you are leasing the property to other businesses you can expect them to pay a premium for this location.
Conclusion
Location is thus a huge factor to consider when thinking about your income yields from a property. Good schools nearby and plenty of transport links is a winning combination for most property types!
We hope you’ve enjoyed our Commercial Real Estate 101 crash course. Here at Fortress Equities, we value educating potential investors on the market so they can make informed investments and property decisions. We also have a highly knowledgeable staff to help you with any questions you may have.
Shoot us a message on social media if you have any other questions about commercial real estate basics, or if you’re ready to take the dive into this highly rewarding market, learn more about our Real Estate Value Fund.