Location, Location, and Location
Nothing can beat a location, location is everything,
and we break location into three categories.
1A. Location: Where is this property located on the Main Road
or artery road, in the main commercial hub, or near the central location? And
connectivity from all central roads, central areas, or highways/Expressways.
2A. Location: Social infrastructure like public transport
-Buses/Metro, Schools hospitals, Railway stations, etc all these social
infrastructures primarily helping residential areas and a great developed
residential area can help commercial to grow.
3A. Location: This third Location we dividing into two parts
Accessibility & Visibility. Accessibility is playing a very important role,
if a building is accessible from the Main road or metro directly without any hassle
you can expect more footfalls. Visibility: the Most important in any
commercial/Shop/High street As per old saying is: what People See is what Sells
( Jo Dhikta hai Wohi Bikta hai). So that means if there are two properties
located in the same area and both have the same Accessibility but one has
better visibility and the second is not, consider only the first which has
better Visibility.
Quality: there can be multiple projects in the same location with all the above qualities but the Quality of construction and internal infrastructure is the main decisive factor.
Good quality and better-equipped buildings attract a better quality of tenants with higher rentals. Needless to say, it will fetch the investor higher rents, better tenant retention, and higher capital appreciation. Multinational tenants are always willing to pay a premium for quality. Look for certifications like LEED gold or platinum ratings or buildings that have nicer-looking lobbies, more elevators, higher ceiling heights, and better views. Higher quality properties are also more liquid and can be sold much faster.
Elevation/Design of a Building: Though Design is
always very important for any building to be it residential or commercial, but
in commercial it plays a very important role, which can landmark a project in
the area if a building has a unique design or an old traditional Elevation
which is different and better in the locality, these unique buildings can
charge higher rental which leads to higher capital value.
Demand And Supply: in terms of existing
This is one of the first things an investor has to analyze before committing to buying a commercial property. Every city has different micro-markets. Each micro-market has an existing Supply (operational high street or Shops) or upcoming shops, an investor should analyze all the existing options and projects completing in the next 2 to 3 years for a fair idea of the demand-supply of that micro-market.
Population/ Target Audience in the next 5/10/15
years: An investor needs to get this very important piece of information in an
upcoming market like Greater Noida West or Noida Expressway. These
micro-markets are in the nascent stage in development Investors should have
fair information about population growth in these areas in the next 5/10/15
years and catchment areas of the project they would like to invest in.
Market Rent Vs In Place Rent
This is a slightly advanced concept that
institutional investors use to see how risky the property is. Let’s assume that
there are three properties available at more or less the same price but each
with a tenant paying different rents.
- Building
A has a tenant paying Rs 10 and is selling for Rs 100
- Building
B has a tenant paying Rs 11 and is selling for Rs 105
- Building
C has a tenant paying Rs 9 and is selling for Rs 95
Which one would you choose? Many would say Building
B, as it has the highest rental return (10.5%). However, an intelligent
investor will first ask, “What is the rent in the market?” meaning what are new
buildings being rented today.
If the market rent is Rs 9, Building C is the safest
investment as the tenant is least likely to vacate the property. Tenants A and
B will most likely renegotiate their rents or not pay the escalations when they
become due. Another way to look at it is that you are buying an over rented
asset at an above-market price.
Profile of Tenants/ Brands Associated with the project
A good Brand can significantly increase the value of
the project, A Diversified approach to acquire brands can help to generate more
footfalls in the project can lead to higher rents. A diversified approach is
like capture all brands in three categories i.e. Food & Beverages, Entertainment,
and Shopping. If carefully select brands in these categories and place them
well around strategically, there is a good chance to increase the footfall.
