CBD Retail Spaces are Hot!
Retail spaces in established Central Business Districts are usually wonderful investments. Think about it this way… Street frontage is typically limited if not scarce. Thus, if the retail climate in your region is good, prime retail spaces will appreciate quickest in terms of rent, thus making them decent investments.
Nevertheless, this does not make them perfect. If the initial cash flow proportionate to the sale price (cap rate) is too low, it might not be worth it, since the seller who have captured the future appreciation of the property during the sale. Yet, there can also be other factors influencing the price of a CBD property, such as leases, nearby growth, traffic, potential for future development or rent increase potential. The factors, along with others can make your urban streetfront retail investment more worthwhile.
Another downside to CBD retail properties is that in some markets, the price of entry is very high, especially for trophy properties in large cities leased to established national and internationl tenants. Examples include Park Avenue in New York City, Michigan Avenue in Chicago and Bellevue Way in Bellevue, Washington. An alternative to the high prices may be to buy in second-tier locations or retail shops underneath mixed-use condo developments, that are typically sold as condos. The downside of condo commercial properties is that they have no future development potential as in most cases they are developed already.
For more information about CBD retail spaces, I would recommend contacting a real estate professional in your market who specializes in CBD commercial/retail properties.
