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Location, location, location: How to determine the best spot for your commercial investment

By Greg Bell

Anyone getting into real estate investment has heard the old trope “location, location, location.” And while it’s not a new concept, it’s as true now as it has ever been. This is especially so for commercial real estate, which requires a steady flow of potential customers.

With that in mind, here are six tips on how to pick the perfect location for your next commercial real estate investment.

1. Check out up-and-coming areas
Generally, most commercial real estate that is customer-focused – like a restaurant or storefront – benefits from being close to the city centre. Foot traffic is a major driving force, so making sure your investment has the opportunity to thrive from potential customers walking by on their way to and from work is valuable. However, cities like Sydney have seen record-low numbers of commercial real estate vacancies, so your options in the central business district may be limited.

If this is the case, it may be valuable to explore trending neighbourhoods. Becoming an early adopter to an up-and-coming neighbourhood has the potential to pay off big. Of course, it’s important to keep in mind that there are associated risks if the area doesn’t become as popular as was expected.

2. Consider security
Whether you’re investing in the middle of a major city centre or the suburbs, safety should always be a priority. Be sure to dig into crime rates in the area, and visit the location at night to ensure there is adequate lighting in the area.

3. Understand nearby transportation
Whether your city relies heavily on public transportation or is more of a haven for drivers, make sure the location you’re considering is easy to get to. Depending on your needs, this can mean anything from proximity to a train or bus route, walking distance from a major commuter line, or a parking lot that is substantial enough for your potential clientele.

4. Research future plans
Of course, no one can tell the future. However, it’s important to consider that city plans move slowly. Attend city council meetings and research what projects are coming down the pipeline. If your city is planning on adding a new light-rail line or bus route to a part of the city that thus far has been a bit of a transportation desert, you could stand to set up a strong return on investment if you get in on the ground floor of a new trending neighbourhood.

5. Ask questions
If you’re planning on buying a vacant piece of commercial real estate, be sure to ask probing questions about why the location is vacant. This is especially true if you’re planning to open a similar type of business as the one that was there prior. Why did that restaurant fail or that shop shutter? How can you do things differently to ensure success? It could very well be that the previous owner simply had a bad business model or there was an internal reason the business couldn’t continue. However, if sales failed to meet expectations, be sure you have a plan to find success where the prior tenants couldn’t.

6. Manage first impressions
No matter what kind of business you’re opening, first impressions matter. Make sure the neighbourhood, street, and storefront all project the kind of image that attracts your clientele. While you have some control over what the exterior of your property looks like, picking an area that will feel welcoming to your customers is absolutely essential.

Wherever you decide to make your next investment, be sure to bring in the professionals to help the commercial real estate investment process.

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