Evaluating Retail Shopping Centers for Real Estate Investment Purposes

In the dynamic world of commercial real estate, a successful investment begins with a careful and thorough evaluation of the property from a number of perspectives. The importance of scrutinizing key aspects of a shopping center to ensure a sound investment prior to entering into a contract for purchase is critical for investors seeking healthy returns. In this blog post, we’ll take you through our systematic approach to evaluating commercial properties, focusing particularly on shopping centers.

Location, Location, Location

The first step in our walk-through process is assessing the property’s location. Is it easily accessible for shoppers, and what kind of access does it have to main roads? A prime location offers a good volume of vehicle traffic and easy access points for customers to get in and out of the parking lot.  

Tenant Mix: The Heartbeat of the Shopping Center

One aspect we pay close attention to is the tenant mix. While some may assume that more retail is better, we believe in quality over quantity. Overly saturated shopping centers can create competition among similar businesses, making it difficult for any business to stand out. Instead, we look for properties with a diverse mix of tenants that will bring in traffic from multiple sources. 

The Neighborhood Service Center

In recent years, the prevalence of online shopping has significantly impacted traditional in-store retail experiences, leading to a decline in foot traffic at many shopping centers. To ensure the commercial investment will be successful, we look for tenants who are an exception to the online shopping trend. Businesses such as nail salons, restaurants, dry cleaners, and florists all require in-person spaces where customers and business owners can meet. Successful shopping centers in today’s market are filled with products and services the local community cannot get online, making them more of a neighborhood service center than a shopping center. In addition, we also look for discount shopping retailers as these businesses tend to be more successful when the economy is in decline. 

The Condition of the Property

Beyond the strategic considerations, we meticulously inspect the condition of the property. A shopping center doesn’t need to boast cutting-edge architecture, but it must be clean, neat, and well-kept. We thoroughly examine the structural and mechanical systems inside and out and identify any issues. Key questions we ask include: When was the roof last replaced? What is the condition of the exterior walls, parking lot, and landscaping? Addressing these questions ensures that any potential challenges are identified and factored into the investment decision.

The Checklist for Commercial Properties

To help guide fellow investors and real estate enthusiasts, we’ve compiled a checklist for evaluating commercial properties, with a focus on shopping centers:

  1. Location:
  • Accessibility for shoppers
  • Proximity to main roads
  • Adequate traffic levels
  1. Tenant Mix:
  • Diverse range of businesses
  • Avoid excessive competition within the same category
  • Service businesses that are “online-shopping proof”
  • Discount shopping
  1. Condition of the Property:
  • Clean, neat, and well-kept appearance
  • Examination of building structure and mechanical systems
  • Evaluation of roof, exterior walls, parking lot, and landscaping condition

By diligently considering these factors, we believe investors can make informed decisions and navigate the commercial property landscape successfully. After all, a thoughtful walk-through is not just about inspecting bricks and mortar; it’s about establishing a foundation for the success of the retail tenants as well as the property owner.

Interested in investing in shopping centers with earnings potential? At ILS Capital, we believe in the power of alternative investments, particularly in real estate. Our real estate funds offer a conservative strategy that focuses on preserving your wealth and delivering consistent returns. Click here to learn more about investing with us. Are you evaluating a commercial property deal and want a professional opinion? At Investor Loan Source we consult with our lending clients to ensure success on every deal. Reach out to Investor Loan Source for a free deal evaluation and financing options to help you close quickly.