Retail properties include stripalls, small convenience stores, single-tenant-occupied properties such as big-box stores, and even large retail malls. Investing in retail estate is riskier than investing in residential and office buildings. Retail properties often require more property management and maintenance. However, many businesses own their own retail properties to capture the benefit for offset their own operational expenses. Many sophisticated real estate investors like to invest in retail real estate because of the additional bonus of the share of the gross sale.
Share the profit of the gross sales
Rental income on retail property is essentially the same as income on office buildings. The major income difference between retail real estate and office buildings is the potential of the share of the gross sale income from the tenants. This practice makes sense because retail landlords make a lot of effort to ensure the property is in good condition, and the facilities of the property are functioning well. The condition of the property is crucial for the retail real estate because the pleasant shopping experience of the shoppers will increase the likelihood of the return of the customers. The well-functioning facilities would also increase the efficiency of the business. The landlord is boosting each merchant's sales by offering a convenient place with a high profile to attract shoppers.
Locations and tenant mix
When you are investing in retail properties, you need to pay special attention to the locations. Retail buildings exist on any level of a building. The sales volume is critical for the merchant as well as the landlord. Sales volume is often measured by frontage; frontage is determined by measuring the total liner feet the building occupations along the length of its main entrance. Retail buildings might be leased or rented by the square foot or by the amount of frontage the offer along a busy street, that's why spaces located on the building's entry level, and the side of the building are most likely to attract customers and always commands more rent. Good parking is also critical, and sometimes congested parking areas can be reworked to provide more spaces and a better flow of traffic.
For shopping malls, Having a good mix of businesses helps the mall appeal to many people, and that appeal drives traffic to the complex, benefitting every business in it. Typical tenant mix includes anchor store, usually big super market, cinema, and famous restaurants.
When you finance for your retail property purchase, Lenders want to see the income and expense numbers, as well as market data showing retail traffic patterns and area growth. You can check with you local chamber of commerce, commercial real estate agents for the data your lenders require and verify what the seller tells you. You can also ask for the tax returns on the business so you can have a whole picture of the potential returns of your investment.