Interest in commercial real estate investments in Russia has recently increased noticeably. The market is gradually moving away from the crisis, small and medium businesses are more actively priced to office and retail premises.
Rental rates are also higher compared to apartments. Let’s try to figure out how to choose commercial real estate for renting out and not to miss
Experts agree in their assessments:
The structure of customer interest is now distributed as follows:
- 1st place – retail real estate;
- 2nd place – office;
- 3rd place – premises in MFC (multifunctional complexes).
Each option has its own advantages and disadvantages, which should be analyzed before making a decision to buy. If you buy a large object, the best option would be an appeal to a consulting firm, which will be able to analyze in detail its investment attractiveness of the object and offer economic models of return.
If we are talking about a small shop or office – even at a super attractive price – it is better to have patience and analyze all the pros and cons.
Talking about location without a specific business is useless. A small grocery store in a residential area of the city can bring you much more income than the same, but in the center: residents of prestigious houses are more likely to go to large markets.
Conversely, a large and well-designed restaurant on the outskirts of the countryside will not attract visitors even low prices and delicious cuisine.
With office real estate is a little more complicated. As the rental rates in the center are high, companies are ready to work outside the TTK, if their business allows it. But the issue of transport accessibility is extremely important here: there is a demand for offices that are located at a short distance from the subway and are located in an area with developed infrastructure.
Without assessing the competitive environment, it is impossible to predict future rental income. Perhaps, this is the most complicated and time-consuming point. If the room has a certain purpose – shop, hairdresser, beauty salon – it simplifies the matter, because you can analyze for yourself whether there are a lot of competitors around, what advantages and disadvantages your room has.
Strictly follow the rule of “trust, but check”: of course, the owner of the premises will convince you that the tenants will line up, and the rental rates here are maximum. In fact, everything can turn out to be, to put it mildly, not so.
Is it profitable to buy commercial real estate in new buildings? On the one hand, you will be able to “stake” a good place, on the other hand – there is no guarantee that the neighborhood will not build a competitor building (supermarket or business center).
Quality and condition of the room
The object of retail, located on the first floor of an elite house and similar premises in a typical new building have significant differences. In the same way the office of class A and B differs from class C.
The prestige of the office is the image, the reputation of the company, so reliable tenants are unlikely to pay attention to the old building with outdated engineering systems and uncomfortable office layout. At the same time, a small office, located in a solid BC, will be much more in demand.
Insufficient power grid capacity. Very important factor for shops, cafes, beauty salons and other tenants with a large number of equipment;
Availability of residential apartments from above. If neighbors flood the premises, repairs will have to be remodeled and work will have to be stopped.
In addition, residents often write complaints about noise, smells and other inconveniences;
- Lack of own parking in front of the building;
- Unprofitable facade;
- Bad work of the management company.
Do I have to do repairs?
It is clear that finishing will significantly increase your costs. But if the room is in a terrible condition, tenants will simply not pay attention to it. Therefore, it is better to make cosmetic repairs in neutral colors.
Office or retail?
Profitability of street-retail premises is slightly higher than that of offices, but there are much more problems with them. Therefore, if you do not want to take any risks, we recommend you to pay attention to small (up to 100 m2) office blocks in ready or under construction business centers with a good location.
The profitability of this option is 18-20%. Advantages – modern layouts, reliable engineering systems, professional management company. You don’t have to go off the ground every now and then to solve the next problem – the service department will cope with it.
Companies with non-core assets in the form of commercial real estate find it extremely difficult to compete with developers on the real estate market. Inefficient management and incorrect optimization of assets will bring losses to their owners rather than profit.
The reason is the lack of experience in making strategic decisions in the field of real estate management. Deeper immersion in non-core asset management can have a negative impact on core business.
For these reasons, such companies are increasingly resorting to consulting services in the field of real estate management. The importance of professional consulting should not be underestimated.
Development of management strategy, selection of optimal rental rates, prompt response to changes in pricing, taxation – all this requires experience, analysis and in-depth knowledge of the market from within. A full package of consulting services helps to save the client’s time and optimize costs.