The three worst commercial property investors’ retail nightmares might not first sound all that terrifying or even unsettling. When you read the headline, you’re probably thinking more about the least desirable retail tenants. But, that’s not actually the case. Sure, there are bad retail tenants which give others a bad name. Of course, there are still other retail scenarios which cause commercial property owners heartburn. However, these can easily pale in comparison to the commercial property investor’s biggest retail nightmares discussed below.
Top Reasons to Invest in Commercial Retail Property
Obviously, there are several reasons to invest in commercial retail property. Perhaps the most attractive is the strong ROI. Because it’s a commercial space, you can usually charge premium rents, particularly when it’s in a highly desirable location. Even if the location isn’t in the most desirable area, commercial real estate brings in a money multiplier. Put another way, there is more than just one tenant which means multiple rent payments.
Owning commercial property is not for the faint of heart. On average, commercial properties are far more expensive than residential properties, and cost more to maintain. For investors with the money to risk, commercial properties can also lead to far higher dividends than residential properties that are rented out or sold. As is the case with many fields of investing, the rewards are proportional to the size of the risks taken. —Houston Chronicle
Another great thing about investing in commercial real estate is that is generally appreciates at a greater rate than residential property. In fact, the average commercial property gains at a rate of 6 to 12 percent, whereas residential earns 1 to 4 percent (at the highest). Also, commercial property tenants must take care of their spaces because it directly reflects on their business.
3 Worst Commercial Property Investors’ Retail Nightmares
Of course, there are always downsides, as with anything else. So, let’s take a quick look at the three worst commercial property investors’ retail nightmares to put you in-the-know:
- If the economy slows, retail is the first to feel the affects. When the economy is on a strong run, retail property is a wonderfully performing asset. Although, if the economy slows, retail is the first to feel the affects, which means it’s more likely to lose tenants.
- A developer builds a brand new commercial retail property nearby. If you own a commercial retail property and its an older improvement, then a developer comes along and builds a new property across the street, that’s a bad scenario. You might lose current tenant to the new building. At the very least, potential tenants will opt for the competition, rather than yours.
- When a retail space goes vacant, it stays vacant for quite a long time. One downside of commercial real estate is longer periods of vacancy (especially when compared to residential). It’s simple to understand, people always need a place to live but there’s just not as much a need for retail space.
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