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5 Key Elements of a Profitable Commercial Investment Property

Key Elements of a Profitable Commercial Investment Property

Top-of-the-line commercial real estate is almost always in high demand in this day and age of mass urbanization and global entrepreneurship, and no matter if your goal is to fix and flip or buy and rent out a commercial property, there is no denying that now is the time to get onto the commercial scene.

Thriving business hubs across the US the likes of NYC, Chicago, and Boston, as well as cities on the west coast such as LA and San Francisco where the entrepreneurial spirit is high are always in high demand for quality commercial real estate, which makes the game competitive, but also highly lucrative.

For example, NYC investors are increasingly pooling money into green properties in order to capitalize on the environmental trend that’s currently booming in the business world, effectively aiding sustainability while elevating the value of the property. Let’s go deeper into this trend and several other key elements that will help you spot and quickly invest in the right commercial property.

It all starts with the location

The most important consideration in your investment strategy should be the location of the property. Yes, there are other crucial elements that we will delve into later, but always remember that the location of your property will make or break your investment in the long run.

This is especially true for commercial real estate where tenants and buyers are looking for offices and retail stores in prime spots around towns, preferably situated in business districts and commercial blocks and avenues teeming with potential customers and clients – there is simply no way to beat the benefits of brand visibility.

To that end, if you are to succeed in commercial real estate, you have to analyze the market and find those prime locations. After that, narrow down your search to those properties that have a vacancy rate of 5% or less. This will prevent future tenants from negotiating the rent in their favor and it usually means that your tenants will stick around longer.

Invest in quality right off the bat

Key Elements of a Profitable Commercial Investment Property

Even though you might have found the perfect spot, that doesn’t mean that you should immediately spring to procure the property – there is still the matter of quality. Always remember that not all commercial properties in the same neighborhood were created equal, as the one that boasts higher-quality rating (better lobbies, energy-efficient systems, more elevators, disability access, better views, etc.) will invariably deliver better financial returns immediately and the long run.

Investing in a high-quality property is a good way to build your growth strategy and minimize risk. These properties will justify significantly higher rents that your tenants will gladly pay, they will always get rented first with future tenants lining up years in advance, and they will provide higher tenant retention along with higher capital appreciation.

Focus on lighting for energy efficiency

Running a commercial building or being a tenant in one is a huge waste of financial resources, which is why tenants are often wary of properties that don’t have sustainable solutions already in place designed to minimize their overheads and energy consumption as much as possible.

This is why it’s imperative that you focus on energy efficiency through lighting primarily, as lighting alone can significantly inflate the tenant’s electricity bill. Here you can find some

To achieve energy efficiency, contemporary industrial lighting requires state-of-the-art solutions provided by experts in the lighting industry that you can find here. These experts will equip the property with high-quality lighting that will minimize energy use while ensuring sustainability and quality of life for the tenants.

Calculate the cost of fit-outs

Calculate the cost of fit-outs

Another crucial consideration is whether or not the property comes completely equipped and decorated, ready to accommodate new tenants, or if it’s empty of any fit-outs meaning that you will have to invest in décor, equipment, and interior design. You can always try to rent the property as is in the hopes that the tenants will invest in fit-outs themselves, but chances are that your tenants will want to move into a ready-to-use property rather than waste money.

This is a great way to safeguard your investment against downturns and it’s why it’s usually a better option to invest in fit-outs yourself, decorate and equip everything according to the latest standards, and then safely increase the rent to cover your investment. The tenants will gladly pay a higher fee for a property that already has everything they need to run a successful business.

Invest in a growing market

Last but not least, if you want to minimize the competition but still generate substantial long-term returns, you have to find those up-and-coming commercial neighborhoods and developments. These rising neighborhoods will attract the best tenants, future business leaders, and plenty of eager customers from around the city.

One of the prime examples is, of course, NYC’s very own Brooklyn which has risen to commercial and residential prominence in the last two decades. Some of the biggest companies in New York have offices in Brooklyn now, and real estate prices have skyrocketed as a result – so be sure to find those up-and-coming neighborhoods yourself.

Wrapping up

Commercial real estate is going to rise in the years to come as mass urbanization continues to thrive around the world. Now is the time to jump into the fray yourself, but be sure to follow these tips in order to make your first investment a success.