8 “secrets” for Commercial Spaces
Whether you wish to buy or to rent a commercial space in Bucharest, there are always some basic rules that you should take into consideration before you proceed. They look simple, but experience showed us that they are more important than you might think. Let’s check some of them together:
1. Always crosscheck all documents – don’t believe anything else
People can tell several stories, but only documents count. Every day, every week, every month we meet people who say that they have something “white” and after due diligence we realize that they’re selling something “black”. This is why I suggest not to be in a hurry to give your price. First we control – then we offer. Or our offer is “subject to verification of information”.
(Don’t laugh, I know tens of investors who lost money due to “surprises”)
2. The rental prices have declined in all areas of the city (with one exception)
Comparing to 2008, all rentals are down. The registered decline is between 30 and 70%, varying from area to area. There is just one exception: Lipscani.
3. Location, location, location
The properties in the best locations continue, once again, to be the leaders of each area, reaching higher rentals comparing to the competition. Our recent study (not published yet) shows that retailers with similar activity and shops located just 100 meters away from each other, both with exposure, have completely different results due to their location.
4. The higher the rent, the deeper the contraction
The highest rental prices of the past were the ones who suffered the most, contracting much more than the “normal” ones. If you want to buy / rent a property today, ask yourself… 3 times if the actual level of rent is sustainable (and better ask an expert to explain to you why).
5. The larger the surface, the smaller the rental price
Large surfaces, suitable for super markets or showrooms, never reached the “rental ceiling” of a property suitable for e.g. a bank, with a surface of 80 – 150 sq.m. This is a rule that is still valid in today’s market.
6. The larger the surface, the more difficult to replace the tenant
Except the option of a super market (renting at a low but stable price), it is not so easy for property owners to find tenants for large surfaces. Do you want to see what happens when too many people ask for very high prices? Go to Unirii boulevard and you’ll see many empty spaces, whose owners prefer to keep their shops empty than to rent them for the price the market offers.
7. Wise people calculate the estimated revenue per sq.m. How about you?
People don’t dream anymore, renting surfaces and “hoping for the best”. Since 2009, it is clear that tenants demand rental prices that can be sustained by the local market. This means forecasting the current levels and expected growth of the market, in order to develop reliable estimates for the expected revenues and profitability of the rented property. Revenue per sq.m. is more important than ever.
8. Empty space for years? Search carefully for the real reason
Sometimes a space is empty just because the owner is asking too much. But many other times there are hidden problems that determine the fate of this property. Don’t be fascinated just by the surface. Try to go deeper and find out why this property is “an opportunity” today.
In a few days my company will publish its first market report for this year and we will be able to discuss more about this issue.
What is your opinion?