Several factors can impact commercial property value. Understanding these can help you make smarter decisions when buying or selling a property.
Functionality
Often overlooked by tenants and property owners, the functionality of a commercial property is a crucial factor in determining its value. Whether you own an office building or a retail space, your property’s ability to meet the needs of current market demand is vital.
Commercial property that does not have the correct type of functionality will likely become obsolete and less valuable over time. It may not attract the right tenants or end users.
Several factors, including the location and transport links of the property, can determine functionality. Additionally, it can be affected by the availability of local amenities such as supermarkets and restaurants.
Inflation
High inflation is a significant concern for many investors like Peter Hungerford. It can affect everything from the prices of consumer goods to interest rates.
Inflation is a gradual rise in the price of goods and services that can be purchased with a single unit of currency. It decreases purchasing power, which means that people can only buy so much of anything for the same amount of money.
Commercial real estate values and rental rates tend to increase in an inflationary environment, allowing owners to earn more income from their property. It is especially true for properties that are already established.
However, purchasing a commercial property during high inflation can be difficult, if possible. It is essential to choose a property type that will protect your investment and keep it stable over the long term.
Location
Commercial property is more valuable if it is situated in a high-traffic area with good transportation links and nearby amenities.
The local and global economy is also significant in determining commercial property values. A rising economy means people are more confident in their ability to repay loans, which boosts property value. The location of a commercial property is one of the most significant factors affecting its value. A property in a desirable area will always be worth more than a similar one in a less desirable one.
Another factor that contributes to the value of a property is its condition and size. A well-maintained property large enough to accommodate the number of tenants is usually worth more than a smaller, older building.
In addition, the location of a commercial property can affect its potential for redevelopment. A property in a highly desirable area may have a better chance of being redeveloped than one in a less desirable location, which can add to its market value.
The location of a commercial property can also affect the type of businesses nearby. For example, suppose a property is in an area with many high-end shops and restaurants. In that case, it may be more valuable than a similar property in a less desirable location.
Redevelopment Potential
Whether you’re looking to invest in commercial office space, warehouse spaces, or any other type of commercial property, understanding the factors that affect value is essential. Getting to grips with these factors will ensure you can get more bang for your buck.
Redevelopment potential is a significant factor that influences the valuation of a commercial property. It is because a property with the potential to be renovated can fetch a higher rate than one without.
For example, a commercial property that’s been in the exact location for years can be worth more if it has the potential to be turned into a new business or a new home.
Redevelopment can be a great way to revitalize a community, especially when current buildings don’t meet the needs of a changing market. It also helps a community adapt to economic and population growth changes. However, the process is long and complicated, and several factors must be considered before starting it.