Chennai

At the best of times, investing in commercial real estate requires forethought, research and planning. When tracking down the ideal property for business operations or for investment, various factors such as soundness of location, health of the local job market, current and future infrastructure initiatives in an area and migration patterns into a city play important roles. Prime commercial properties require even greater insight and investigation. Investing in a commercial property in a prime location can have multiple benefits:

• It is easier to find tenants for properties in prime locations than in low-demand locations. This is important as it plays a role in yield calculations. Leaving a commercial property vacant for long periods will lead to loss of income.
• Banks are more willing to give loans to commercial projects in prime locations, since there is very low likelihood of capital loss.
• It is easier for employees to travel to work - a major factor, considering employee retention ranks high on employers’ priorities today.
• A commercial office in a prime location increases a firm’s visibility and reputation. It is a demonstration of your firm’s commercial worth to your clients, partners and other businesses. Also, the capital appreciation of a prime office property reflects very favourably on a company’s balance sheet.

Prime Locations: Both in terms of business potential and returns on investment (ROI), the highest value lies in prime office spaces. The ‘prime’ value in commercial real estate is vested in the location, which leads to the question – how does one define a ‘prime location’? The factors that make a location prime are a function of its overall accessibility within the city, the quality of infrastructure that supports it, the saturation of high-profile firms represented there and the overall quality of buildings in the sub–market. To determine if a location is prime, investors need to examine the following parameters:

• Is the property accessible via all modes of transport?
• Is the property close to major commercial hubs?
• What is the demand-supply gap?
• What is the tenant profile of the location? Which industries prefer it and what are their growth potential?
• Does the location have good social infrastructure such as restaurants, malls, shopping centres etc.?
• Is the location well-planned or has it grown with increased needs?
• Are there many commercial space transactions happening here?
• Do the buildings have a modern look and feel? If the answers to most of these questions are positive, then the location is a prime one.

Prime Properties: The next aspect to determine is whether the project and property meet ‘prime’ criteria, as well. There are over 30 important technical specifications that a commercial property must meet, and this needs to be verified by an expert. If the project is under construction, the buyer or investor must be fully updated on the construction risks, the developer’s track record, etc.

The project and property must also be assessed for:

• Repositioning potential 
• Refinancing potential  
• Refurbishment potential

Employing a reputed real estate consultant is a key factor for success. Expert, research-driven advice can ensure that one is not buying into a property or location which has or will have major drawbacks high vacancies and result in low ROI.

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