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Key Points to Property Performance

When first looking at a commercial investment property, there are some key points that stand well above everything else when it comes to a basic property performance assessment. These can be used in getting an immediate feel for what the property can do or how it functions. At a later stage you can then move to a more detailed assessment if the overall property is attractive to your plans of listing, buying, or renting.

Consider these as the primary points of property assessment:

Lettable Space Supply and Demand: Where does the commercial investment property sit in the known factors of space supply locally? You need to know if it is competing with its lettable space or if it is struggling. If the property is older then it will be less attractive to occupants than the new developments in the local area; in the medium term this will impact on rents and tenants will move to a newer property when the time is right for them. This means that close monitoring of newer developments being constructed in your area is a wise move. Refurbishment is a worthwhile element of planning if your property is becoming older. The return on the cost of the refurbishment is however a consideration that needs to be balanced. Interestingly many developers and inexperienced landlords will overestimate the potential rent from the refurbishment to justify it, and then get stuck with a problem of letting the space at the higher rentals. Be careful on this point.

Regional and Local Location Factors: Does the property give good exposure and access from the road and transport network? Retail and commercial property is high ranking on location scale. When first assessing a property I have found that walking around the neighbourhood area and the property boundary will give you a good feel for the finer points of location. I would be looking at the fall of the property levels and the visual impact that the property provides. If signage is used on the property, just how visible is it and how well is it maintained.

Layout and Design of the Property: Is the property user friendly and attractive? Both the tenants and the customers to a property must feel that the property serves them well. They like to visit a property that is welcoming and easy to get around. To assess this, you can visit a property on different days and at different times just to see how many people move through the property and where they go. Retail and office property is more important in this regard. The property will have an ‘ant track’ where people move and congregate.

Property Amenities and Services: Are you providing everything that a modern business or property needs? Tenants and customers today are very sensitive to the quality and availability of property amenities and services. With retail properties particularly it pays to talk to the customers visiting the property to see what impressions they have of the amenities and services that they use. Any weaknesses should be addressed quickly.

Car Parking: Are customers and tenants well served with respect to the parking of vehicles? Car parking is many things including convenience, safety, lighting, design, and flow through of vehicles, signage, and available parks. If the car parking plan works then the visitors to the property will be satisfied at the basic level of property usage. Do however look beyond the property to ascertain how transport and roads feed the property and the car park. You can have the best car park locally, but if it is hard to use or get to then the matter is self defeating.

Tenant and Landlord Covenants: Are the leases and tenant profiles strong? Given that an investment property is supported by cash flow, it is the leases for the tenants that give the property a future; vacancy is not a desirable option unless you want to do a new development. The particular details of a lease should be reviewed before any judgement is reached on price, rent, or property suitability. Seeking a legal counsel on the lease is very useful to interpret many of the lease elements that are more complex. What you are looking for is anything that could lessen or destabilise occupancy.