Introducing our new blog post, where we delve into a common question from retail property owners… “What is my property worth?” Hear from our head of acquisitions, Aubrey, while he explores how to determine the value of your property, whether you’re a seasoned owner or new to real estate.
I wish I could give you one simple calculation but in retail real estate, there are many factors and attributes that contribute to the overall value of a retail property or shopping center. At the end of the blog, there are five examples representing different New England retail properties and our assessment of their current value to help you match up your property and get a better idea of its value.
If you already own a property, you probably know that location is THE biggest contributing factor in determining its overall worth, especially in RETAIL real estate.
Some factors that make it higher in value include: being in a primary shopping district, near a densely populated area and rooftops. Next, think about the visibility and accessibility of your center. If your center is highly visible to customers and located at a signalized intersection on a heavily traveled main thoroughfare, these factors will also make your property more valuable. How accessible is your property? Does it have multiple entrances/exits?
What’s the condition of your building? Is it new construction or very New England style and rather old? Areas to assess include all your building systems such as roof, HVAC, parking lot and facade. If you’ve invested capital in some of these areas vs. everything needing to be replaced you’re ahead of the game as potential buyers will inspect the property for major deficiencies.
Next, think about your shopping center and its occupancy. Whether your property is single tenant or multi-tenant, the creditworthiness of them is extremely important. Things to consider include your tenants sales volume, whether or not they pay their rent on time, and if they are adept operators. Also, familiarize yourself again with all of their leases, some may be guaranteed by a significant company or individuals with deep pockets.
In speaking of tenants, it’s important to be sure their spaces include proper depths and ceiling heights. For multi-tenant properties, for example between 10,000 SF – 50,000 SF (catering to smaller to moderate size spaces between 1,000 SF – 4,000 SF) depths shouldn’t be greater than 90 feet. If your depths are greater, it could be challenging for the buyer to later subdivide the space or even lease it at all. Ceiling heights should generally be 10 feet or higher to create an inviting customer experience and be sure the tenants have enough room to market effectively.
Zoning is also a big contributor some people forget to think about. There are different zoning districts so you need to figure out which your property is in. Hopefully you’re in a retail district in which most retail-type uses are permitted. Some retail and restaurant uses are permitted “as-of-right” but others are subject to a special permit or variance process which can make your property less desirable to a buyer.
If you are still confused or looking for more of an exact dollar evaluation of your shopping center or retail property, feel free to give us a ring (781-202-3545), or, we’re happy to help and of course there is no obligation, we like hearing from our readers.
IDEAL PROPERTY ATTRIBUTES & FACTORS CHECKLIST
The more that align with your property, the higher in value it is.
LOCATION
- Primary shopping district
- Densely populated area
- Visible to customers
- At a signalized intersection
- On a heavily traveled main thorough way
- Easily accessible with multiple entrances/egress
TENANCY
- Strong tenant sales volume
- Good creditworthiness
- Rent paid on time
- Adept operators
- Lease guarantee by a significant company vs. individual
ZONING
- The district mostly permits retail-type uses
- Retail and restaurant uses are permitted as-of-right
- Don’t need a special permit or variance
CONDITION
- Newer construction
- New roof
- Highly functioning HVAC system
- Parking lot in good shape
- Updated facade
DEPTH
- Spaces are easily sub-divisible
- Adequate store frontage
- Adequate unit width
HEIGHT
- Ceilings 10′ or higher