What location is best for Commercial Property?

In this blog, we’ll cover a range of things to consider about the importance of location for a commercial property. While the focus from our commentary is for buyers, rather than tenants, many of the considerations we will raise could equally be considered by tenants when considering where to lease a property.

When considering the location of a commercial property purchase, the important factors will differ, depending on whether you are investing, or occupying the property. So, are you looking to invest (for a return, and also growth), or are you looking for a property where your business can operate from? This is really the core consideration to start with, as it will help to provide you with clarity about what is of most importance to achieve your objectives.

Let’s look at the general ‘investor’ criteria first.

If you’re an investor, you’ll likely want to buy a commercial property in a location that has generally reliable characteristics that should underpin capital growth, while also generating a reasonable (rental) return. The location characteristics our investor clients generally look for vary depending on whether they are looking for retail, commercial or industrial investment property, as you may expect, but some of these essentials include:

  • Proximity to public transport (not in an isolated location).
  • Proximity to essential services (banks, hospitals, post office, supermarket etc).
  • Easily identifiable position (making it easy for customers to find your tenant’s business).
  • What infrastructure supports the location (motorways, major arterial roads, travel times to capital hubs etc).
  • Population size and projected growth.
  • Popularity as a holiday destination.

In summary, an investor will generally look to buy a commercial property in a location that will make the property desirable and easier to rent to prospective tenants (if you have to find a new tenant). The above points will be useful filtering criteria to achieve this aim. A key consideration here is that the location supports the tenant in running a successful business. If the tenant’s business is successful, they will be less likely to move on, and if they do move on, you’ll have good demand from new prospective tenants. The more demand you have, the more the value of the property improves. 

Now let’s consider what is important to ‘Owner-Occupiers’ in considering the location of the property they buy.

If you’re an owner-occupier, looking for a new property to suit the needs of your business, you’ll likely consider some (or all) of the above points, though not from a perspective of future capital growth. While capital growth may be a factor to consider, it is generally not a primary consideration. An owner-occupier’s needs are generally driven firmly by the needs of the business. These needs differ from business to business (and industry to industry).

Following are a number of points we commonly encounter with our clients, which you may like to consider if you are looking for new commercial premises for your business.

  • Proximity to your customers / target audience (if you deliver to them or they come to you).
  • Access to major transport routes and hubs (for both receiving and despatch of goods).
  • Easily accessible and identifiable position (making it easy for your customers to find and get to you).
  • Proximity to public transport (making it simpler for both staff and customers to get to you if they are unable to drive).
  • Proximity to competitors (sometimes it can be advantageous to co-locate with similar businesses, but sometimes it can be detrimental – it depends largely on what industry you’re in).
  • Distance from another branch of the company (think geographic limitations for franchises, or having even distribution between locations to effectively service a larger region). 

It goes without saying that you want to make it simple for your customers to find you. For retail style businesses, having a high profile position that offers easy access to and from the site is key to ensuring your don’t miss out on trade (if your customer can more easily go to a nearby competitor). For an e-commerce business, a high profile position is unlikely to be of the same value to you, but finding a location that is easily accessible for logistics may be critical to keeping lower costs and faster turn around for your customers. Getting the foundations right (from the start) when finding new premises is essential, as relocating a business something you want to be doing often if it can be avoided.

The best tip we can give is to get genuine clarity around what your business needs. This may seem obvious, but the clearer the picture you have, the easier all of the flow on decisions will be, as you can quickly determine if something does or does not serve your clear vision.  If we can be of any help in discussing your investment or business needs, whether you’d like to talk through more detail on the above, or however else we might be able to assist you, please contact one of our team today.

P: 4325 0208
E: [email protected]
W: www.chapmanfrazer.com.au