Retail center investments are an excellent opportunity, especially when it comes with a dedication to maintaining the area’s history. These kinds of investments, when executed carefully, can yield attractive total returns as well as a constant stream of rental income and capital growth. But purchasing a shopping center is far more complicated than just buying a few things from its stores as takes thorough due diligence, careful planning, sufficient funding, and operational expertise.
Characteristics of a Shopping Center
It’s critical to understand the essential features of a shopping complex. These shopping malls usually have one or more “anchor” tenants, who are well-known companies that attract clients on their own. These anchors are backed by a range of smaller tenants, like coffee shops, dry cleaners, etc., which enhance the shopping experience and boost foot traffic.
Despite their potential, shopping centers have a lot of risks. The success of smaller tenants can be impacted by changing consumer preferences. Moreover, a shopping center’s viability is affected by the evolving dynamics of surrounding neighborhoods, competitive pressures, and the substantial costs tied to tenant improvements.
To improve the chances of successful retail center investments, it’s essential for investors to carefully evaluate a range of factors that could influence both the present and future value of the property. For instance, at West Hive Capital we helped negotiate and rebrand a Liquor store into a both a liquor starts and market demonstrating our commitment in adapting to both the community and investor needs to help enhance the shopping experience.
3 Key factors to consider
- Location: The saying “location is everything” applies especially to retail shopping complexes. The center must be located in a prominent area with good visibility from main roads and easy access points to increase the likelihood of success and draw in tenants. Characteristics of a good location include neighborhood safety, car traffic, foot traffic, parking, signage, functional configuration, convenience, neighborhood demographics, and competition.
- Condition and Age: It’s important to evaluate the building’s present state before making retail center investments, particularly in older commercial centers. Even though the cost of these places may be reduced, prospective buyers should be prepared to set aside money for upkeep and budget for large expenditures, such as large repairs. You can also bring an older property up to current standards by buying it at a reasonable price and doing some modifications to bring it new life and create a
positive impact. Owners can then raise rents because of this development, which
raises the property’s worth overall - Tenants: It’s critical to understand the current tenant base of the shopping mall in light of the local population. For example, a luxury mall with high income tenants might struggle to survive in an area experiencing economic hardship. It is also essential to assess the tenant mix’s diversity, experience, and financial stability.
Considerations when Investing
Working with a private equity firm that specializes in finding America’s best-in- class retail centers is critical considering these important considerations. Our investment approach at West Hive Capital is concentrated on purchasing underperforming retail property all the while respecting and maintaining the retail area’s unique historical character.
