The Future Requirements of Commercial Real Estate

May 20, 2019

The business of commercial real estate is of immense profit these days. The government is formulating rules which are actually beneficial for this business. But as we all know that this business is basically of two types, one being the residential real estate and the other being the commercial real estate. The investment in commercial real restate is of course more than that of the residential properties but at the end of the day the returns are simultaneously much more in case of commercial properties. However, one must keep in mind that the following are some of the requirements of the upcoming days in this particular business fields.

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1. Diversifications: We all know that diversification reduces risk. This is specifically true in commercial real estate. If one invests all savings in one property, then the person is more exposed to higher risks. In case the tenant vacates, rents stop as the maintenance payments, property taxes etc. are to be paid. Investing in multiple properties across cities reduces variance in income by diversifying property variance risk.

2. Security Deposit: Security deposits in commercial property varies between 10-12 months’ rent. One has to be careful when the tenant offers 6 months’ or less as that can mean that they would look for a short-term options or cash-flow problems.

3. Lease Structure: Commercial lease structures are very different than that of the residential ones. They are usually 3+3+3 or 5+5+5 that is likely to be minimum of 9 years and maximum of 15 years with an increase every 3 years or five years. They are also one sided like the tenant can vacate any time but the landlord cannot tell to vacate. There is also a lock-in period of 3 years when the tenant cannot vacate also. In general, the longer is the lock-in it is that better for the investor.

4. Base-rents vs Fit-out rents: Developers often dupe investors by showing higher rental returns by including the fit-out rent component while hustling them for a higher price. But one must keep in mind that the fit-out rents are not permanent and are paid only for a fixed period that is like 5 years only.

5. Interior Fit-outs: When an office is delivered in India, it seems like a garage. All the fit-outs are often done by the leaser while at times the lease can also ask to do the fitments by themselves only. However, in the second case only it is beneficial for the leaser as the tenant will tend to stay longer in order to sufficiently recover the cost.

6. Quality of Tenant: A good tenant can significantly increase the value of a commercial property. Look for blue-chip multi-national tenants and avoid smaller and unknown companies. Good tenants pay rents on time, pay higher deposits, stay longer and increase the value of the property.

7. Demand vs Supply: This is one of the first thing that a savvy investor has to analyze before committing to buying a commercial property. Every city has different micro-markets. Each micro-market has a stock (amount of office already completed and leased) and upcoming supply as well.

8. Quality: Two building in the same location can be there but the one with better quality will obviously be getting a better rent. It will also attract better quality of tenants. Needless to say, that it will fetch the investor higher rent, better tenant retention and higher capital appreciation. Multinational tenants are also willing to pay only for quality.

9. Location: Location is everything. Commercial properties provide returns through two avenues— rent and capital appreciation. Both are heavily dependent on the location. Look for locations where vacancy is less than 5%. This will mean that supply is in check and tenants are less prone to vacate leading to higher rents and capital appreciation.

Keeping all the above-mentioned points in mind, one can highly find the requirements being meted in the real estate projects in Bhiwadi with excellent features like fantastic architecture, latest technology, stunning design, high-street connectivity, modern facilities, business suits, complete security, delicious food and fun. With a strong base and optimum strength, this structure will be durable and stable against earthquake and other physical damage. This project is going to build this modern-edge structure for the common people of the town, where they can enjoy shopping of branded products along, quality food in modernly designed restaurants, entertainment and many more. Also, this marketplace will give a business opportunity to potential tycoons to experience at one single place in the area.