Real Estate Value: The Importance of Location in Property Investment
The importance of location in real estate investments is undeniable. Experts say it’s the very essence of real estate investment. Location directly influences the property price, rental income, and capital appreciation potential. A successful investment to a large extent depends on the property’s location. Whether you are investing in a residential or a commercial property, location becomes the prime determinant.
However, the question is which factors are responsible for making a “location” a “good location” for real estate investment. Here’s a look at the top considerations for residential and commercial properties.
Location Factors to Prioritize for Residential Properties
- Top-Notch Connectivity
Connectivity plays a key role when we talk about the importance of location in real estate investment. Our approach is to check the location of the property before everything else. We make sure that our investors choose the best location that is close to all the civic amenities and convenience factors. A good location is close to public transportation points, schools, markets, and more.
- Good Neighbourhood
A location with safe neighborhoods is a priority when you are considering real estate investment. Soaring crime rates even in the metro cities make it difficult for investors to deal with property investment peacefully. You will never want your house being barged into by criminals. Similarly, you do not want to be robbed during a morning or evening walk in your locality. Thus, safety is a major parameter characterizing a good location.
- Good Infrastructure
A location with infrastructural development attracts potential investment in the realty sector. Projects like rail, roads, bridges, and commercial centers increase the potential value of any property over time. Also, they help in generating income from rental yields.
- Proximity to Nature
With global warming and pollution, it absolutely makes sense that investors will look for residential properties surrounded by nature. Proximity to gardens, parks, or lakeside is crucial for property valuation and also a major consideration for investment in the s residential properties. Such properties offer a unique living experience with a respite from the urban chaos and also offer high capital appreciation. They make a perfect vacation home that is great for investment as well.
- Convenience Features and Amenities
Convenience and amenities play a key role in considering realty investments. A good location offers strategic advantages in terms of facilities and amenities. Proximity to shopping malls, fitness centers, recreation clubs, and commercial centers makes a property highly potential for investment.
Also Read: Difference Between Residential and Commercial Property
Location Factors to Prioritize for Commercial Properties
From generating rental yields to high capital appreciation, commercial properties offer lucrative options to maximize returns. From retail spaces to business centers, from offices to data centers to warehouses and industrial sites are commercial properties and help generate income. However, the location of the property to a large extent determines the pricing structure.
Check out the key location factors that influence the value and potential of commercial properties. Also, sometimes location of the commercial property becomes the sole parameter of investment decisions. Here’s why:
Ease of Accessibility
A commercial property that is well accessible through major transportation links has the potential for high valuation. A well-connected business space helps employees in their daily commute. Also, commercial spaces with ample parking facilities are considered premium. Such properties ( retail spaces, business centers) are well deserved for potential investment.
Foot Traffic
Commercial properties like retail spaces, shopping malls, cafes, and restaurants being located in high-footfall areas are most likely to generate more sales. They naturally attract potential clientele by being noticeable on a bustling street corner. Also, a storefront with a stunning exterior generates interest, thus translating into higher sales. Properties in such areas make a profitable investment asset in the commercial segment.
Market Demographics
Identifying market demographics is important while considering an investment in the commercial segment. Analyzing the market, including the needs, preferences, and behavioral trends of the local market provides insights about the kind of business that might thrive there. For example, a high-end restaurant, cafe, or boutique will thrive in a plush neighborhood. Precisely, areas with higher disposable income are ideal for luxury commercial spaces while budget businesses will thrive better in the mid-income regions which are densely populated. As an investor, it’s crucial to decide where to invest to maximize the returns.
Availability of Skilled Workforce
Commercial properties that require a skilled workforce must have their hubs close to training colleges, universities, or similar institutions. Tech startups thrive great near technical and engineering colleges, while advertising firms flourish close to art schools. At the same time, investors must gauge the local market in terms of labor availability, wages, employment trends, and so on to figure out the sustainability chances of a business in a particular area.
Proximity to Complementary Businesses
Closeness with other similar businesses boosts sales as well as client patronage. Also, staying in a business hub alongside other businesses makes competition tough but profitable. It helps you get access to more clients and various other revenue streams that will further result in more income potential.
Local Regulatory laws
Adherence to the zoning laws of a s particular area is important for commercial property investment. A commercial property can be zoned for restaurant, office space, or retail space based on its operational process. Also, a commercial property that you are investing in must align with the local laws about waste management, building modification, use of signage, and more. Consider the legal matters thoroughly before investing.
Keep in mind, that commercial properties are primarily intended for income generation and the location plays a decisive role in it. These location-oriented factors differentiate a thriving commercial place from an ordinary one.
Also Read: Top Reasons to Invest in Commercial Real Estate
Investment in the Emerging Locations of India
You might have heard that investing in emerging sectors results in high returns. But, before that, identifying a potential emerging location is important. Emerging or growing locations are more affordable than central areas. But, over time ( when the infrastructural developments start taking place) their capital appreciation rates go higher.
Such emerging areas, though unnoticed by the mainstream realtors have all the potential to become major real estate hubs shortly. Such emerging areas attract business and government policies over time, thus translating into high-income-generating assets. The growth trajectory of Bangalore and Hyderabad over a decade is spectacular, following significant infrastructural development and population growth
Identifying Emerging Locations for Investment: Key Considerations
- Business Dynamics: While the emerging locations are somewhat in the outer skirts of the city, the business dynamics of a particular region make it an emerging location. As an investor, you need to figure out whether a particular region is conducive to business growth. Major infrastructural developments such as corporate parks, factories, and tech hubs can transform a city’s outskirts into a thriving commercial zone.
- Infrastructure Projects: If you are considering emerging sectors for investment, keep an eye on the growth of major infrastructure in that area. Projects like railway or metro stations, highways, and similar others are a clear indicator that the area will attract potential investment in the long run. Such areas are always ideal for cost-effective investment and high returns.
- Government Policies and Initiatives: Emerging areas funded by the government as special economic zones have great potential. The Government provides grants regularly for the growth of these areas. Investment in the residential as well as the commercial properties of emerging locations translates into high returns.
- Migration Patterns: The infrastructure development as well as the government-aided growth results in the population influx in some areas. This indicates the demand surge in real estate investment.
Advantages and Disadvantages of Investment in the Emerging Location
| Advantage | Disadvantage |
| Emerging locations have high growth potential, thus translating into higher returns. | Despite high growth potential, emerging locations are susceptible to political instability. This affects business as well as growth potential. |
| Investment in emerging locations helps diversify investment portfolio and reduces risk | Emerging locations are highly volatile which can lead to currency risks anytime |
| Properties in emerging locations have lower valuations compared to the ones in the central area. | Property purchase and selling in the emerging locations is still difficult, which poses a liquidity threat |
| Emerging locations offer untapped growth opportunities in business. | Corporate governance become extremely difficult for emerging areas. |
| These areas are emerging following significant business development | Regulatory Risk Regulations in the emerging location are |
The Quick Formula for Decoding Growth Potential of a Location
The demand and supply gap determines the potential price appreciation of a real estate property in a particular location. To figure it out, it’s important to analyze the availability of property in a particular location compared to the demands from buyers and renters. The difference/gap indicates pricing trends and returns.
Also Read: Fractional Ownership vs. Cryptocurrency
Final Thoughts
While the importance of location in real estate investments cannot be ignored, it’s also true that location alone cannot be the only decisive parameter. Residential and commercial -both have different parameters when it comes to investment. Weighing the pros and cons of a particular location is important, especially in a volatile market. There are instances when the emerging location does not offer the desired returns as expected.
If you are considering investment in the real estate sector, consider the market dynamics thoroughly to identify the potential. Connect with the Slice Vista experts for more insights on this.
Also Read: Comparison of Commercial vs Residential Fractional Investment