Bricks and Sticks: One of the quietest corners of the real estate market. Investment opportunities for ‘Bricks and Sticks’ have been few and far between, especially during the recession. Now though, with the economy turning around. With our local real estate market rebounding and the forecast looking good. Banks are starting to lend again on property and this is exactly when you need to be flourishing.
Banks and private commercial real estate lenders today are seeing massive amounts of competition in the commercial financing market.
Because people’s credit ratings are improving significantly. Leaving them with much better loan options and a better chance of getting a home loan that they could only dream of before.
When you think about it though, it makes perfect sense. Every one is trying to boost the market, because everyone needs a place to live. The faster the housing sales pick up, decrease foreclosures and unemployment. The banks benefit from making money on their own investment. While the rest of us get to harvest sweet, ripe opportunity from up and coming investments.
‘Bricks and Sticks’ commercial properties offer some of the biggest opportunities around.
Trading or investing in something small and Often times referred to as ‘blue chip’ assets. This trend has shown to not only protect the investor, but also create some extremely high returns on investments when ‘re-performing’ and re-leasing. Usually means upgrading old and established properties, to new improved ready to rent ‘product’.
The biggest, most popular growth market in commercial real estate is retail strip shopping centres. Because of a revitalized market, many opportunities are available to be savvy investor or commercial property specialist.
Retail strip shopping centre
A retail strip shopping centre is basically an old building, suited for old retailing and improved tenancy mix. Overhauling the property so it can be used more efficiently and more productively with better tenants and a modern service/ebin building exterior may pose some risk. In general though, the risk is manageable and lucrative because of the large development, leasing and trading space.
A retail strip shopping centre is made up of several smaller strips of shops housed in the centre where they can be joined to create small independent outlets and thus increase the shopping experience.
When applied the right way, this strategy can help a staid neighbourhood get a facelift and become something much more than just a run down site with a ten storey building.
Most projects will need smaller improvements to attract tenants, but it’s better for the investor to do minor upgrades and alterations to the building than risking major risks by doing major works.As you can see though, this is a key factor that makes this type of commercial real estate so attractive to mid and long term investors.
The return on investment from durable, long -term tenants will always be the focus of the project. Tenants like ‘open a coffee shop’ type tenants because it means they are more likely to give them every new customer they can, versus providing a food service and behave like a restaurant.
If you want maximum returns on your investments, with minimal risk, then the best strategy would be to invest in ‘Bricks and Sticks’, refurbishment and renewal of tenanted properties. Understanding how to accomplish this on a commercial basis with minimal impact on existing tenants will make you the money.
Let’s look at the following example to illustrate the power of doing it on a commercial scale. Traditionally, a club owner or investor (usually) buys a property with a good location, solid tenants and many years of age. In this scenario, strengthening the property with renovations (replace each with brand new units), and a tenant mix revamping to provide many new choices. The net effect will be a great improvement in the property’s user experience.
Retail shopping centre
For example, a great retail shopping centre could have a single theme or theme for life. A great tenant will see this as an opportunity to strengthen the brand and provide additional revenue. Depending on the agreement you might enter into, it can extend this concept into ‘enceclosure’ styled tenant mix options too. That means – for example – you might have a different tenant on each floor who chooses to have a particular colour scheme, which bleeds off to different tenants in various ways. The one thing is that you don’t want to see this as a minuscule little change, but one that can make a huge difference in how customers perceive your property.
Also, some strategy does not involve altering the tenant mix at all. You might be lucky to have a slightly older or ‘pooled’ tenancy. This is where you would be happy to provide minor work with some cosmetic refurbishments on just two or three units.