How to assess different types of commercial property?

First and foremost, the best method in assessing an area is to go and walk the street or drive through the industrial estate to see how popular the area is with businesses and customers. No number of desktop checks can replace walking the road where your potential investment is.

The second best method is to speak with a locally based commercial agent and ask them how long on average it would take them to find a tenant for that area.

• Exit Plan – the first consideration when looking at a property is what is the exit plan if it goes wrong.

• How easy will it be to get another tenant who will want the property as it is?

• Is the property capable of being used for other income streams e.g. can a shop upper floors be converted to an office or residential.

• Is the unit over or under sized sized for the area and can be split up into smaller units. Most retailers are looking for 800 to 1000 square feet on the ground floor.

• Does the property have rear access or separate access to the upper floors to make splitting it up easier?
  

• Retail – High Street, Out of town retail parks, local parade.

• Retail’s busiest days are the weekends and Market days, so choose a quiet day to visit. If there is still a reasonable customer presence on those days this will only improve on the busier days.

• Know which the main retailing streets are for that Town and be on one of those if possible.

• The amount of ground floor selling space is important for new tenants.

• Occupancy rate - look how many vacant units there are on your street. You need to make an assessment, is it to a degree that will put off future tenants. Do not include charity shops when looking at the occupancy rates, they are artificial representation as they only need to pay 80% of the business rates.

• Brand presence – how many brands are in those streets, whilst one-off boutique shops can create a nice feel, it’s the brands that pull people in. How many brands and which ones are there. Some brands like Greggs and Costa can survive on any high street, does it have a good depth of brands?

• What is the population size for the catchment area, ease of access, transport links and parking.

• General demographics for the area such as average house prices, average wage and employment rates. For retail to work it needs people with the ability to spend within a commutable distance.

• Industrial – ranges from small units for start up businesses to large warehouses. They can be one unit in a village to hundreds of units located in dedicated industrial parks.

• There is currently an under supply of Industrial so they are in demand. Smaller units attract new business start ups. Start ups happen all the time even during economic down turns. So they tend to be most in demand.

• Rent calculated per square feet or meter, are often influenced by the rents paid with neighboring properties.

• How near is it to major roads. Tenants will want to be able to get larger vehicles to the site easily. Can you get a van through the door?

• Is it within a popular industrial park? How many units for let in that park?

• Whilst there are some good units that stand alone, to remove risk best find ones in a dedicated area. To reduce the risk of noise complaints from nearby residential areas.

• You should also consider if any new industrial parks are being developed, will future tenants want to switch to the new location?

• Larger units and warehousing - it is better to line up a tenant during the purchase process via a commercial agent, who may have people on their books looking already.
  

• Office – the increase of home working has certainly change prospective tenants view on committing to office space. As such ‘serviced office’ space that is rented out for short periods at a time is currently popular. However, it requires the landlord to provide cleaning services for that building and there is a higher turnover of tenants.

• Check for vacant office space within a commutable area.

• Population size, ease of access, transport links and parking.

• General demographics for the area such as average house prices, average wage and employment rates.

• Exit Plan – there are many offices that started life as a large house, so this is a realistic option to change to residential and either rent or sell.