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There is no one-size-fits-all strategy when it comes to purchasing real estate. As with any property investment, there are a number of factors to consider to ensure you are making the right purchase. Here are some considerations when buying a retail property.
By Nikki De Guzman
1. Nature of your business
Identifying the nature of your retail business helps determine the very basic factors you need to consider when making your property purchase. Once the nature of your retail business has been determined, decision-making when it comes to property size and type will be simplified.
In addition, identifying the nature of your business is also essential in determining the location at where you are buying a retail property, as well as to whether or not you can operate your business there. It is important to note that there are existing regulations that are in place to limit or ban certain types of business at some areas.
2. Budget
When deciding to buy a retail property — any real estate for that matter — one of the main considerations is what you can afford. Often, entrepreneurs would want to get their money’s worth on property, as it is the part of their business investment they would have greater control over.
Choosing the right type of property is easily narrowed down by the amount of money a business is able to spend on it. Knowing the budget for property purchase will, too, help in determining how much more or less a business will have to fork out on renovations, purchasing business equipment and ultimately, its working capital.
3. Location
The widely-used adage “location, location, location” remains true for commercial properties, especially for buyers looking to make their return of investment (ROI) through revenue, e.g., retail property. Choosing the right location for your business not only depends on the area where the business is located but also the type of establishment it is in.
Whether it is in an HDB block in a densely populated neighbourhood or in a prime retail mall along Orchard Road, location is one of the major factors that can make or break your business. The accessibility of your business to your customers, employees and suppliers also plays an important role in how your business is likely to perform.
4. Usage restrictions
Whether due to building codes, zoning laws or historical conservations, there may be restrictions imposed on some properties in certain locations in terms of renovation, redevelopment and use.
There are cases where in a commercial property may not be converted from one function to another. For example, a shop unit previously used as a showroom may not necessarily be permitted to be used for restaurant operations.
There are also cases where the allowable retail businesses are limited by law, while there are also places where specific businesses are not allowed.
5. Upsizing and downsizing
No entrepreneur will be pessimistic about the growth of their business, but just as there is a flipside to everything, there is also the unfortunate possibility that a business does not grow as much as planned.
Preparing for the potential to upsize, as well as knowing what you can do with your space should you need to downsize are equally beneficial as this allows you seize the opportunity in a robust economy, yet still remain profitable should the market go bust.
6. Legalities
Not many business owners are experts when it comes to commercial real estate. Aside from the legalities they have to deal with before they can run their business, legal concerns also are at play when buying a retail property.
Things like building contracts, property taxes, and government approvals are some of the legal issues a business owner will have to know about when planning to run a business. That’s why you are strongly advised to hire a lawyer who specialises in commercial property; he / she can help you with the nuts and bolts of the rules and regulations involving your business and your business property.
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