Commercial Real Estate Pricing Trends for 2012

There seems to be mixed results with the commercial real estate pricing trends this year.  It appears that the General Commercial sector is rising, while the Investment Grade is decreasing.  However, one fact is certain, and that is that we are continuing on with recovery in this field.  According to CoStar the steady increase of the General Commercial sector is the main clue that the recovery is continuing.

Here are a few important facts that were found in the April release by the CCRSI:

·   Due to a dip in Investment Grade pricing, the US Composite index showed a decline of 1.3% in February 2012.

·   The Investment Grade index showed a decline of 6.6% in February.

·   The three major commercial property types are office, retail, and industrial, and they have been positive in net absorption of both general commercial and investment grade.

Even though the Investment Grade index declined 6.6% in February 2012, that actually is a trend.  Typically the Investment Grade shows a decrease within the first 2 months of the year.  Although the trend may suggest otherwise, investment grade properties have increased 11.5% since 2009.  These investment grade properties seem to be doing better than the general commercial properties.  

Although it has remained relatively consistent, the General Commercial index has shown improvement over the Composite index.  CoStar states that a reason for this is partly because of the increase in demand for general commercial properties, and a diminishing higher end of the market to net absorption. The good news is that the increasing absorption of general commercial properties is not a sporadic event.  The results show this to be a steady increase that can be expected to hold.

Leave the ‘Right’ Kind of Lasting Impression

When it comes down to it, it’s the location and ambiance of a restaurant that determines if it succeeds.  You can have the best chef in the world but if the location of your restaurant is not up to par, your reviews and profits will definitely show.   

Here are two things to take into consideration when you are searching for a new restaurant site.

Lots of people = lots of profit

It’s very important to find a location that will be able to reach a wide variety of people.  You want to find a place where there are a good amount of people that will be able to visit your restaurant without a terribly long commute.  Along with the actual number of people around the vicinity, you also need to think about the demographics of that region.  

It wouldn’t be profitable to place a 5-star, expensive restaurant in a rural area.  The key is to play into your surroundings.  If your restaurant is located near many businesses, be sure to offer options for quick lunches for those people who are on their lunch break.  

What can’t be seen, doesn’t exist

Make sure that you are visible to people just ‘passing by’.  You don’t want the type of restaurant that is only known by regulars.  Most people go to new restaurants because they have passed by a place multiple times, and thought to themselves ‘I’d like to try that out’.  No amount of advertisement will be able to outweigh the importance of having a location that can be seen easily.  

Essentially, picking a great commercial real estate property is key in your restaurant’s success.  The location is the first thing that people will notice before entering your eatery, and it’s the last thing that people will notice as they are leaving.