An old saying asserts that what someone doesn’t know can’t or won’t hurt them. However, in practice, this statement is often false. Ignorance of vital information can harm you in various scenarios – including commercial real estate investment.
In our previous blog entry, “4 Common Property Investment Mistakes to Avoid,” we cautioned against failing to conduct adequate research before investing. That includes investigating not only the property itself but also the surrounding area. This is a critical part of doing your due diligence.
If you’re evaluating commercial property or searching for the best area to invest in, you’ll want to conduct a market analysis to ensure you’re making a well-informed decision. Your assessment should include the following key factors. Note: This is not an exhaustive list.
1. Demographic data for the area.
Learning about the local population’s demographic characteristics, such as age, gender, education level, and employment, will offer you valuable insights into a commercial property’s chances of success. The U.S. Census Bureau and Bureau of Labor Statistics are reliable sources for this type of information, according to the commercial real estate software provider PropertyMetrics.
2. Local economic trends.
Look into whether specific industries dominate the economy in the area and are driving job growth, as recommended by Dealpath, a real estate investment management software supplier. Additionally, depending on the type of business you’re looking to invest in, you should do some research concerning tourism in the region. For example, shops and restaurants will thrive in places where tourists flock.
3. Environmental factors.
It’s imperative to consider the property’s context in terms of natural and human-constructed environmental characteristics, according to the survey platform provider Voxco. These are just a few of the questions you’ll want to cover:
- Is the area prone to floods, fires, tornadoes, earthquakes, or other natural disasters?
- Is there a large body of water nearby?
- Does the region have reliable public transportation?
You should also look up other businesses in the area to asses your potential competition.
4. Demand for commercial real estate.
It’s vital to assess the supply and demand in the marketplace. To determine demand, PropertyMetrics recommends pulling up employment data. For example, if an area has many people working in industries like trucking and manufacturing, there’s probably plenty of need for industrial property. As for supply, key contributing factors and indicators include vacancy rates, interest rates, and land and construction prices.
If you’d like expert guidance on your commercial real estate investment journey, the Avalon Realty Associates team can assist you with our property investment services. We’ll safeguard your investment like we own it and can conduct the necessary research for you. Visit our client services page for additional details, or contact us by calling 847-506-1000 or emailing info@avalonreal.com.