Commercial real estate is an integral part of our daily lives. Grocery stores, salons, restaurants and fitness centers are housed in commercial properties, which are also often referred to as non-residential properties. However, not every non-residential property can become “commercial.” This status has a real estate that is used for business purposes – for trade, medical, beauty services or any other.
Today there are 5 types – commercial premises, offices, hotels, industrial buildings, universal “commerce”. In order to competently choose, we propose to consider each type separately.
Experts divide property into “creating conditions for income” and “income generating”. The first category includes warehouses, logistics complexes, workshops and other production facilities. The second group includes offices, stores, hotels, hotels, business and shopping malls. Parking lots and garages are also considered income-producing real estate.
Each type of commercial space needs an appropriate environment: for example, the area around business centers should have public transportation stops, parking lots, cafeterias and stores.
1.Trading floors
We can refer to shopping centers, complexes, chain and retail stores. In the entrepreneurial environment they have established themselves as quite profitable. According to experts, the annual profitability of retail premises reaches 11-12%. What else is important to know when buying these properties: sites, as a rule, are characterized by a solid area and cost, which are able to fully pay for themselves in the future lease. The main thing, experts assure, to find a “passable” place. Also, the success of the business guarantees the presence of such establishments, in which the location of the development is in short supply.
2. Business sites
These are various business centers and complexes, individual offices and co-working spaces. Such sites, following the example of the previous ones, are among the most profitable and are in high demand among investors. According to modest calculations, the profitability of office premises is equal to 9% per year. This is not a bad indicator, which is guaranteed to the owner in case of favorable location of the object and competent choice of tenants.
3. Hospitality
We are talking about hotels, hostels, recreation centers, apartment complexes, etc. The latter are not only in demand, but also a fashionable type of real estate. The popularity is natural: the need for housing has always been and will always be. Favorably affects the hotel business and the development of tourism, including domestic tourism.
The greatest benefit can bring hotels in major cities, especially if located in the neighborhood of architectural and cultural attractions. At the same time, costs can be minimal: a few rooms with good repair and communications are enough to realize the project.
4. Industrial
This includes all kinds of factories, warehouses, industrial enterprises and workshops. This type is considered less profitable: the average yield is about 8%. However, the objects have an undoubted advantage: the premises do not require special preparation and control in the process of operation. Tenants, as a rule, independently purchase the necessary equipment and create optimal conditions for the business.
5. Multipurpose facilities
Such objects are suitable for realization of virtually any business ideas – from opening a beauty salon to an Asian restaurant. The versatility of such an option makes it one of the most favorable offers on the Uzbek market. However, the requirements for premises are higher, as well as their cost in Tashkent. Among the main ones is the presence of a separate entrance, full repair and engineering communications, which, however, is also asked of other types of “commerce”.
Hotel complexes, according to the research of various foreign publications, are also in demand among investors and retain the third position in terms of investment volume
Thus, the win-win options in the market can be called universal premises, shopping and business centers. Industrial ones are not at all devoid of liquidity. With high profitability and demand, the advantages of sites are not limited. What advantages are characteristic and why they are in such demand among investors – we continue to tell you below.
Advantages:
“Commerce” is one of the popular investments. The interest of businessmen in commercial objects is quite justified: the space allows you to get a good profit in the long term without serious time and energy costs. On this the strengths of “commerce” are certainly not exhausted. We offer to familiarize ourselves with the main ones below.
Today, wealthy citizens also purchase residential premises on the first floors, which are subsequently converted into non-residential premises and used for commercial purposes.
1. High profitability
As mentioned, commercial ones are one of the liquid real estate formats on the Uzbek market. Their annual profitability reaches up to 12%. Only apartments are able to compete with them. The average yield of the latter in annual terms is equal to 10%. For comparison: when renting out an apartment owner can expect up to 4% per annum. Let’s be honest: the difference is tangible, and it is not in favor of residential properties.
2. Long-term benefit
And again, everything is known in comparison: potential tenants of apartments, as a rule, are looking for a place to stay for a couple of months, in the best case – for a couple of years. Apartments, for all their advantages, are an even shorter-term accommodation option – from a couple of days, up to a week at most. “Commerce”, on the contrary, is oriented to long terms of hiring. Agree, there is hardly a business owner who wants to change location every month with all his “luggage” in the form of equipment, staff, etc..
3. Wide range
It is wrong to believe that the market is less saturated than, for example, the suburban market. Of course, the situation depends on a number of factors from region to region. But the peculiarity of Tashkent and developed cities of Uzbekistan is that there is no shortage of supply in the market. How is it ensured? The market is successfully developed by real estate developers, most of whom envisage the first floors in their projects for “commerce”. One should not discount residential premises on the first floors of apartment buildings, which are now actively joining the ranks of non-residential premises at the expense of enterprising investors.
4. Universal characteristics
Most offer future owners a wide maneuvering field. The prevailing number of premises can serve virtually any purpose – and as a cozy coffee shop, and SPA-salon, and medical center. Of course, there are also many exceptions to the rules, and it is worth taking into account both the features of the object and location. Even in the absence of the necessary characteristics of good repair and proper use of the room can make the object a reliable source of passive income.
Significantly simplify the repair process in the premises of industrial type will help to choose in favor of modern styles, such as loft, which is characterized by open communications and brickwork
Proper operation is probably the main factor in this series. Success, in turn, will ensure a full study of the Uzbek market in the location of interest and the specifics of the territory as a whole. However, it is certainly not enough to understand what the neighborhood is “focused” on and what kind of facilities are needed here. Read below to find out what else you should pay attention to when choosing a site and which of these aspects are key.
What you need to pay attention to when choosing:
“There are quite a lot of pitfalls when buying. They concern both the question of pricing and the paperwork. Location and demand for the place plays a role. We suggest familiarizing yourself with these and other features of acquiring “commerce” in the section.
Purpose and condition of the premises
First of all, it is important to decide on the future “fate” of the commercial site. What you want to see in the new walls – a café, a beauty salon or modern apartments. If there are no ideas as such, and the question of further profit is at the top of the list, you can stop at universal options. However, it should be taken into account that the proposed budget and the market offer can also contribute to further plans.
Regardless of further plans, it is better to purchase small premises. According to statistics, it is easier to rent them out than one oversized site. It is also more profitable, based on the calculation of the price per square meter. Of course, the recommendation is generalized, and in some cases the acquisition of a large (for example, an industrial facility) may be more profitable.
The larger the area, as a rule, the more difficult it is to rent and the lower the profit per sq./m.
Certain risks are likely not only when acquiring oversized premises, but also when focusing on the primary market and buying an object at the initial stage of construction. Such an investment is undoubtedly profitable, but only if the developer and location are fully trustworthy. If there are doubts whether the object will be delivered on time and in accordance with the project documentation, it is worth preliminary study and the activities of the developer, and the prospects of market development by the time of commissioning of the object. However, market analysis is not a bad thing in any case.
Demand
We recommend paying attention to a detailed analysis of the chosen location. Study the specifics of the territory and the presence of certain establishments in the proposed place of purchase. For example, in a tourist area will be in demand for hotels, in secluded suburban areas – health centers. If there is a shortage of sports facilities, it is more justified to purchase premises for fitness centers, in the absence of entertainment facilities – for cafes and bars.
Location
You should also be interested in the status of the location: how developed, whether the area is prosperous and whether the area has a developed transportation network. Otherwise, safety and accessibility, rather than prosperity, may become paramount in business. Further “stuffing” of the location depends on the type. In the case of retail sites, the site should be provided with walkability and located near public transportation stops (subway, bus stops), airports and railway stations.
It is no coincidence that near the subway and other crowded places are provided shopping and entertainment complexes that guarantee a full range of services
When opening business centers, it is important to provide for the presence of stores and café-bistros, cafeterias nearby. In addition, for the movement of employees in the location should run routes of surface and underground transportation. Hotel complexes are perfectly located in the central and near central areas. A separate plus will be the proximity to museums, theaters, cinemas and other cultural and entertainment institutions. Industrial facilities are better to acquire in the area of highways and railroad tracks. The presence of necessary production and warehouses nearby will also be a big plus.
Facility documents
The legal side is equally, if not more important. Before buying from either an individual or a legal entity, it is important to make sure that all the documents for the object are in place and in good order. At this step, it is better not to limit yourself to recommendations on the Internet and involve an experienced lawyer who will check the documents before buying a commercial object. The main package that should be requested from the owner is an extract from the BTI, a certificate of registration of the property and papers confirming ownership or actions under a power of attorney.
Cost of the object
Not only the documentation but also the market offer needs to be studied in detail. It is important to understand what objects are currently on sale and what their average market value is. You must agree that buying illiquid premises at an unreasonably inflated price can hardly be part of a competent business plan. This, in turn, directly affects the payback and further profitability of the property.
According to the statistics of recent years, the shortest payback period has street retail objects – 6-7 years. Office premises also show good indicators, which will start to bring profit in 9 years after purchase.
The payback period of industrial and industrial objects is slightly higher than other types of “commerce” and is equal to 9-11 years
Acquiring a facility at a below-market price is now possible at bankruptcy auctions. Online and offline auctions in the real estate market are rapidly gaining popularity. However, before participating in the auction, we recommend a detailed study of this niche. It, like any other, is not without its risks and nuances, but at the same time is a real way to acquire liquid premises at a reduced cost. Also, if you lack your own funds, you can buy commercial real estate on credit. Today, many banks provide various commercial mortgages, which are aimed at supporting investors.
In order to more accurately assess the risks, we suggest calculating the payback period of investments and potential profits. We will stipulate that the figures give only an approximate understanding of the transaction, and to get a more accurate picture requires the services of specialists and the calculation of many variables in the market.
So, to determine the payback period, divide the price of the property by the annual rental income. You can get an approximate price by reversing the figures and dividing the annual rental income by the price of the property. For example, you purchased a premise for UZS 100 million and rented it out for UZS 10 million per month. In this case, the purchase will justify itself for 10 years and in the future will bring a profit of 10%/year.
Commercial real estate can be bought with a mortgage, but it should be taken into account that interest rates are usually higher than for residential real estate.
Thus, commercial real estate can be a good source of passive income for the long term. To do this, it is necessary to competently approach the issue of site selection. The status of the location, the size of the premises, the state of repair and documents – each aspect should be in the field of vision of the investor. What else should be paid attention to and what disadvantages are inherent in “commerce»?
What else to consider when buying a com. object
Even if the object is available and meets all the required characteristics, we recommend not to rush into the transaction. Before making a purchase, it is advisable to take into account several important aspects.
Economic situation
Under the influence of the economic situation, real estate prices can spike, so before you buy non-residential premises, assess the state of economic affairs. To be fair, we note that all real estate is subject to the mood of the economy, and “commerce” is no less sensitive to its downturns and rises. Today, according to experts, the market situation is relatively calm. Moreover, the commercial sector demonstrates greater stability than, for example, the primary sector, but what awaits the market tomorrow is an open question.
High entry threshold
It is also worth taking into account the cost. Of course, the pricing is influenced by a number of factors – the location of the site, type, area, availability of repairs, etc. One way or another, with few exceptions, is a significant financial investment. Lack of repair will require additional costs, including time.
A separate item of expenditure may be the purchase and installation of the necessary equipment in the room (air conditioners, lighting fixtures, hoods, tables, etc.)
Payback period
Даже при покупке высоколиквидного предложения и постоянной эксплуатации помещения важно понимать, что объект начнет «работать» на вас далеко не сразу. Минимальный срок окупаемости составляет около шести лет. В среднем коммерческое помещение становится источником дохода по истечению восьми лет. Цифры условны, но отнюдь не лишены справедливости.
Leasing
This point is not of interest to those who plan to buy premises for their own business needs. But if you are interested in buying a commercial object for further leasing, you will not be able to do without selecting a suitable option and concluding a sale and purchase agreement. You or a trusted person will have to search for tenants and carry out regular communication with them. This process can be quite costly, so in the case of a do-it-yourself solution it is worth considering the purchase as a job or business, but not an investment.
Namuna Development Company offers a wide range of non-residential premises in NUR residential quarter.
Commercial premises are one of the most popular investments on the investment market in Uzbekistan. The company offers non-residential space from 25 sq.m. to 250 sq.m. is perfect for a variety of businesses: from start-ups, stores and offices.
