Why street frontage on commercial property is so valuable
How many meters of street frontage does the property have?
This question is one of the most important when evaluating the value of commercially zoned property in a city or county. To some, the reason why this question is so important may seem quite obvious. However, there are multiple reasons why investors, developers, builders and business owners want to have a large amount of road frontage on their commercial properties.
For business owners, it is better for them to have their stores conveniently located for their customers. If they are on a highway or main road, they will have great visibility of passing traffic. It is quite possible that this can bring customers to your stores that they would not normally see through your normal merchandising. Also, a customer new to the location can find the store much easier when in line of sight. Visibility in front of the main road is a great advantage for business owners and their stores.
Another reason business owners like to have their stores along the main street is because of the ease with which customers can get on and off the property. If they are forced to drive through large parking lots, pass behind other major stores, and park in a gated lot, there is a chance the customer will go to an easier-to-reach competitor.
Now this may be putting a bit of a strain, because a business should be able to attract customers on its own through effective marketing and good business practices. However, it’s definitely nicer to access a place of business that’s just off the road, rather than finding your way through parking lots, other businesses, and who knows what else. The easier the access, the more pleasant the customer experience will be.
The two main reasons business owners have their stores on the main street are visibility and ease of access. Let’s look at why investors, developers, and builders want the properties they are involved in to have as much frontage on the road as possible.
These three people—investors, developers, and builders—are the foundation of commercial real estate. They have the money; they have the vision and are ultimately responsible for building our communities.
More often than not, these folks will choose properties to invest in that have the most road frontage, or create the roads for office complexes, strip malls, and shopping malls to have the visibility and ease of access. access that business owners seek. in a profitable commercial property.
The underlying advantage for these investors to develop and build main road frontage properties is the fact that these commercial properties, known as exterior parcels, are far more valuable than the land enclosed in parcels behind them! The difference between these property values can be quite drastic.
For example, I was recently looking at a 56-acre raw piece of land in Rome, GA. It had over 2,000 feet of frontage on a major road! The front of the property was zoned commercial, while the rear was zoned multi-family. After speaking with the broker and looking at the comps (comparable sales), it was clear that the exterior parcels would be valued at approximately $600,000 per developed acre. (They could be worth more if we could have national brand stores on property.) However, those on parcels, with no road frontage, would only be valued at $225,000 per acre. This is a $375,000 decrease in value simply because the packages are a few hundred feet from the actual road.
This news greatly reduced my overall profit margin.
Not all cases are so extreme. However, it is always true that an outside plot will be more valuable than an inside plot. That’s why investors, developers, and builders want properties that front a major street. It’s just more valuable!
Business owners and investors alike will gladly choose a property with main street frontage over a parcel with no land, or a parcel with little or no street frontage. Use this important fact when evaluating properties and their value.