Tuesday, 22 August 2017

4 Things You Need To Consider When Investing in Retail Space

Written by Posted On Monday, 20 February 2017 12:47

Investing in retail property can be a lucrative and rewarding investment. But before you do decide to invest, this article highlights 4 of the most important factors you need to take into consideration, including budget, location, use, and timing, to make sure you make a sound investment.

 

 

1. What Is My Budget?

 

Investing in any type of property is expensive, and retail property is no different. You need to carefully consider your budget and all extra costs in order to ensure sound investment.

 

Use your budget to determine the size of the space, its location, and its purpose. You will also need to consider costs to repair any damages in the property and to turn it into the space that you want, with modern amenities and the desired facilities to suit your business’ function and make it attractive to prospects and customers.

 

You also need to take into consideration stamp duty tax, business rates, property tax, insurance, maintenance costs, running costs, energy costs including electricity, gas and water. If you are leasing out the property you could pass some of these costs onto your tenants.

 

 

2. Where Is It Located?

 

Finding the right location for your shop is vital. There are many places to locate your business, including high streets, town centres, shopping centres, out-of-town retail parks, and city centres.

 

Think about your customers and understand their shopping and spending habits and consumer behaviour. A newsagents or hairdressers will have a different location to a larger DIY or clothes store, as will a restaurant or bar or independent craft shop.  

 

Ideally, areas with high traffic are best, as you need to be in front of your customers. Consider how much footfall there will be to your shop, as you don’t want to be located where no one will find you.

 

Also consider if there are enough staff in this area, or whether there are sufficient transport links for staff and customers. There also needs to be accessible parking facilities for suppliers and customers.

 

Think about your competitors. Do you want to be located close to your direct competitors and utilise their ready-made audience, or situated further away so as not to hinder your business. Make sure any surrounding businesses add something to your shop.

 

Is the store located in an up-and-coming area with more potential for customers and growth, or an area that is degenerating and has lots of empty retail spaces?

 

 

3. What Purpose Will the Space Serve?

 

Decide which type of shop you want the space to occupy. The function of the space will depend on how big the space is and what function it has already been designated to do under the Town and Country Planning Order 1987. If you wish to change its use you will need planning permission.

 

What business will you run in this space?  If you are going to let the property, what type of shop will be in demand for prospective lessee? Retail properties could be shops, hairdressers, undertakers, travel agencies, ticketing agencies, post offices, dry cleaners, pet shops, butchers, sandwich bars, showrooms, funeral directors, internet cafes. What was the space used for previously and did it work effectively?

 

Before you invest in the space, get a building survey to assess its condition and make sure there is no great structural damage, roof damage, damp, leaks, damaged electrical wiring, or bad broadband connection. This will help you to assess the cost and level of repairs you might need to carry out to make it suitable for its business use. You may also need to allow space for a store cupboard, office toilet, dressing room, kitchen etc depending on its function. Know what you are looking for before you start to search.



4. Is This The Right Time?

 

You need to make sure you’re investing in a retail space at the right time. What does the market look like right now? What competition is there?  What’s available? What’s the price? Is tenant demand high?

 

If the economy is currently suffering from a market crash or time of economic uncertainty, it may not be the best time to invest in retail, as retail is particularly vulnerable and susceptible to

suffering many ups and downs.

 

However, this can be said for all types of investment, and so, investing in retail property can actually help to reduce the risks associated with economic instability, as will allow you to diversify your portfolio and spread risk across a number of assets.

 

If the timing is right and the economy good, spending on the high street may be high and investing in retail property can be incredibly rewarding and profitable to you as an investor, with high investment yields.

 

 

Although investing in retail property can be risky due to economic instability and uncertainty, through thorough research and careful consideration, investing in retail can be an incredibly lucrative investment. Retail properties have the potential to return high investment yields, and allow you to spread risk and diversify your portfolio.

 

In order to reap the benefits of retail investment, consider your budget and whether it can accommodate your plans, make sure its location is right for you and your customers, ensure that the space will be right for its function, and that you are investing at the right time.

 

Allcott Commercialis a building consultancy providing project management, building surveying, architectural and structural engineering services to a range of property investors, occupiers and developers throughout England and Wales.

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