Left: A "drive-by" analysis of a strip mall's tenants will tell you a lot about how that property is managed and performing.
Below: If the business "out front" in a strip mall location has multiple open drive- through lanes that are clearly operational, that is a good indicator that the traffic through an area is good.
at a retail location for Chili’s, a wildly successful, national franchise. You can be reasonably confident that a Chili’s in Dallas, Texas, and a Chili’s in Frisco, Texas, will both do pretty well for the area. However, the Chili’s in Dallas will likely be worth more to its land- lord than the one in Frisco because the population in Dallas is larger. On the other hand, if the Chili’s in Frisco is located on a corner with a stoplight in the center of a high-traffic area and the Chili’s in Dallas is on a divided highway outside the city limits and requires a U-turn two miles up the road just to access the restaurant from the opposite side of the highway, that Frisco Chili’s just might beat the Dallas restaurant. IT’S ALL ABOUT HOW MANY PEOPLE ARE GOING BY AND IF THEY ARE ABLE TO GET TO YOUR BUILDING AND SPEND MONEY. THINKING BIGGER IS OFTEN BETTER When it comes to the cold, heartless facts of commercial real estate, you must
accept that national chains are usual- ly more valuable than mom-and-pop stores. Don’t hate me for saying that! There is definitely a market and a place for individually owned businesses and buying local, but when it comes to your average strip mall, a location with na- tional tenants like Starbucks or Mattress Firm (probably the ones you are most likely to recognize right off the bat) will usually offer higher values than those with smaller chains or mom-and-pop operations. This is due, in large part, to national chains’ ability to sign long-term leases and assist landlords with mainte- nance, property taxes, and other types of upkeep. They usually also have higher credit ratings, which means if you are not planning on keeping the building for yourself it will be easier to sell it. You also should take note of free- standing buildings in front of the retail space (see example above). Is there a 24-hour Walgreens? How about a fast- food restaurant? Not only can these ten- ants make your property more attrac- tive; they can also tell you a lot about how things are going in your potential investment right now. For example,
Commercial Real Estate Value Factors You See EveryDay THERE IS A GOLD MINE OF DATA AVAILABLE JUST BY DRIVING BY.
LOOKINGAT LOCATION INANEWLIGHT We have all heard it thousands of times: “In real estate, it’s all about location.” When you are looking at a commercial property, that is also true. However, the value of the location as a commercial investment is measured differently than when you think about residential invest- ments. With commercial investments, it’s all about the traffic. This means the size of the population in the area, the amount of foot and automotive traffic that passes by, and the type of traffic guidance and control (traffic lights, street signs, street design, etc.) all play a huge role in the value of a property. Say, for example, that you are looking
by Pamela J. Goodwin
particularly like out front, or maybe you remember you had been meaning to stop by that big-box arts-and-crafts or DIY store. Every single one of those thoughts
hen you drive by a strip mall, you probably notice it in an absent- minded sort of way. Maybe you get a little hungry if there is a popular restaurant you
is a gold mine of information to a com- mercial real estate investor, and each retail outlet can tell you dozens of facts about that commercial property.
24 | think realty magazine :: june 2018
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