Welcome to my “How to make money in the commercial real estate”. Today, the commercial real estate is much more attractive for investment purposes than residential. "Owner" learned how to choose a commercial premise, what common mistakes should be avoided.
As in many other types of investment, buying a property as a source of income, the potential owner should put at the heart of the concept of using this property. It is a correctly defined concept that will allow you to choose the right place and get the maximum profit.
Requirements are growing
Let's start with the fact that different types of business, obviously, make different requirements to the premises: what is good for a restaurant, cannot be absolutely suitable for an office or retail space. Well, the assessment of the compliance of the premises of the proposed concept consists of many parameters - from the location and state of similar business in the district to the technical state of the premises and communications. And if an entrepreneur is a novice in this field, then there is no way to do without a consultant.
As the training broker of GK "Babylon" Alexander Leichenko says: "The simplest and most understandable is the purchase of office space, the most complex, and at the same time profitable - retail space. However, their profitability is gradually beginning to move away from super-profitable. " And indeed, the era of superprofits in the domestic market of the commercial real estate is gradually disappearing. "By 2008-2009, the average profitability of commercial real estate will approach Russia's average European level," said Andrey Khalturin, CEO of RIGroup. - Accordingly, rates will decrease also. That peak of profitability, which began in 2003-2004, is now coming to naught. " However, this does not mean, of course, that investments in commercial real estate now do not bring profit - just to get it you will have to make more efforts. The fact is that a few years ago, the deficit of commercial space in all market segments was so great that the developer could not think about such a "trifle" as the concept, but, nevertheless, his superprofits were regularly received. Now, to achieve the same results, we have to think much more, which, in general, is rather good - if we still want to approach the European level.
Example with minus sign
Let's give an "example from life" mistakes in the selection of commercial real estate. A two-story premise with a total area of 200 square meters turned up for the beginning restaurateur. mat a good price. The room was purchased, a consultant was invited to organize the restaurant business. And he gave an unequivocal conclusion: this real estate cannot be used for a restaurant, because a huge staircase passes through the center of the room, "eating" part of the space and making it impossible to arrange a number of necessary premises for the restaurant (kitchen, wardrobe, utility room, etc.) in the right order (streams of visitors should not intersect, etc.).
The same kind of mistakes is now also encountered in the market of retail premises, where it is not always possible to select correctly anchor tenants (this issue is not paid enough attention to this day because not so long ago the shopping center promised super profit with one fact of its existence). So, within the boundaries of one district, several shopping centers with multi-lantern cinemas can appear as "anchors" (while only one, a maximum of two). In addition, often developers "neglect" and, for example, include in the project only escalators working on the rise, and descend visitors invited on foot. For the sake of justice, we note that such gross errors are more typical for regional projects and are given here as the most illustrative example.
Risk - a noble cause
The most important question, which should be clarified before the investment purchase of commercial real estate - income and risks. And it will be necessary to forecast for 2-3 years ahead, because, according to statistics, the year goes for the full registration of property, the second - for construction and repair work and the third - for the formation of the business. "It is difficult to predict risks and profitability for a newcomer in the field of commercial real estate," believes Alexander Leichenko. "Even many experts cannot give a clear answer to this question since too many unstable factors need to be taken into account: the dollar exchange rate, oil and gas prices, macro and microeconomic situation, etc."
If you formulate the thesis, in general, there are 3 main options to ensure the profitability of the business you buy, and the choice of a particular option depends on the room and its expert evaluation.
1 way - modernization, when the current business does not change. For example, the owner, having bought an office of class C, modernizes it to an office of class A.
2 way - re-profiling, in which the owner completely changes the profile of the purchased premises, for example, instead of opening a bar or a fitness center.
3 way - business "from scratch", in which the owner builds or completely reconstructs.
As in many other types of investment, buying a property as a source of income, the potential owner should put at the heart of the concept of using this property. It is a correctly defined concept that will allow you to choose the right place and get the maximum profit.
Requirements are growing
Let's start with the fact that different types of business, obviously, make different requirements to the premises: what is good for a restaurant, cannot be absolutely suitable for an office or retail space. Well, the assessment of the compliance of the premises of the proposed concept consists of many parameters - from the location and state of similar business in the district to the technical state of the premises and communications. And if an entrepreneur is a novice in this field, then there is no way to do without a consultant.
As the training broker of GK "Babylon" Alexander Leichenko says: "The simplest and most understandable is the purchase of office space, the most complex, and at the same time profitable - retail space. However, their profitability is gradually beginning to move away from super-profitable. " And indeed, the era of superprofits in the domestic market of the commercial real estate is gradually disappearing. "By 2008-2009, the average profitability of commercial real estate will approach Russia's average European level," said Andrey Khalturin, CEO of RIGroup. - Accordingly, rates will decrease also. That peak of profitability, which began in 2003-2004, is now coming to naught. " However, this does not mean, of course, that investments in commercial real estate now do not bring profit - just to get it you will have to make more efforts. The fact is that a few years ago, the deficit of commercial space in all market segments was so great that the developer could not think about such a "trifle" as the concept, but, nevertheless, his superprofits were regularly received. Now, to achieve the same results, we have to think much more, which, in general, is rather good - if we still want to approach the European level.
Example with minus sign
Let's give an "example from life" mistakes in the selection of commercial real estate. A two-story premise with a total area of 200 square meters turned up for the beginning restaurateur. mat a good price. The room was purchased, a consultant was invited to organize the restaurant business. And he gave an unequivocal conclusion: this real estate cannot be used for a restaurant, because a huge staircase passes through the center of the room, "eating" part of the space and making it impossible to arrange a number of necessary premises for the restaurant (kitchen, wardrobe, utility room, etc.) in the right order (streams of visitors should not intersect, etc.).
The same kind of mistakes is now also encountered in the market of retail premises, where it is not always possible to select correctly anchor tenants (this issue is not paid enough attention to this day because not so long ago the shopping center promised super profit with one fact of its existence). So, within the boundaries of one district, several shopping centers with multi-lantern cinemas can appear as "anchors" (while only one, a maximum of two). In addition, often developers "neglect" and, for example, include in the project only escalators working on the rise, and descend visitors invited on foot. For the sake of justice, we note that such gross errors are more typical for regional projects and are given here as the most illustrative example.
Risk - a noble cause
The most important question, which should be clarified before the investment purchase of commercial real estate - income and risks. And it will be necessary to forecast for 2-3 years ahead, because, according to statistics, the year goes for the full registration of property, the second - for construction and repair work and the third - for the formation of the business. "It is difficult to predict risks and profitability for a newcomer in the field of commercial real estate," believes Alexander Leichenko. "Even many experts cannot give a clear answer to this question since too many unstable factors need to be taken into account: the dollar exchange rate, oil and gas prices, macro and microeconomic situation, etc."
If you formulate the thesis, in general, there are 3 main options to ensure the profitability of the business you buy, and the choice of a particular option depends on the room and its expert evaluation.
1 way - modernization, when the current business does not change. For example, the owner, having bought an office of class C, modernizes it to an office of class A.
2 way - re-profiling, in which the owner completely changes the profile of the purchased premises, for example, instead of opening a bar or a fitness center.
3 way - business "from scratch", in which the owner builds or completely reconstructs.
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