Getting started with Commercial real estate investing

[Abhishek Sahni]

Hi,

I am looking for advice on getting started with Commercial Real Estate Investing. I am inclined towards investing in Retails spaces.

I am new to this space and would love to get pointers on how to get started, how to find RE agents, any gotchas or considerations for new investors. Please share reading material , getting started guides or books that might help.

I am currently based out of the San Francisco Bay area and I am looking to invest within a 2-3 hour driving range.

Regards

[Evan Polaski]

@Abhishek Sahni, at the surface level, real estate investing is real estate investing.  When you dive into it, there are a lot of nuances.

First, there are subsections of retail: single tenant NNN, small unanchored neighborhood, grocery anchored, shadow anchored, power centers, regional malls, lifestyle centers, etc.

Then you get into tenant mix and market specifics. 

On the buying side, there are not really "re agents" per se in most commercial deals. There are listing agents, but buyers are almost always self represented with legal counsel helping negotiate LOI and PSA.

Loopnet and Crexi are the most common platforms for listings, but many brokers don't list properties there.  So, you will be going to CBRE, Marcus and Millichap, Cushman, Colliers, and likely some local brokerage websites to find various listings.  Most brokerages will have a retail investment sales team and likely a retail leasing team.  You will want to talk to both.  Sales, clearly for actual investment opportunities.  Leasing to understand market rents, pros and cons of specific assets, any insider knowledge on tenant interest, etc.

Then you get into the day to day operations.  Leasing, property management, tenant billing, lease administration, finance, capex budgeting, etc.  

Your leasing broker will be able to help with this, but things like which side of the street you are in can make a big difference.  Coffee shops like the "to work" side.  Grocers like the "coming home side".  Ingress/egress is considered, other tenant mix to draw foot traffic, exclusive use clauses, pylon signage, visibility, parking ratios, etc all matter. 

The biggest thing though is retail is not entirely price sensitive. Most retail tenants will happily pay more in rent if they can get more sales.  

I worked for a retail operator for many years.  The partners spent their careers in retail real estate and made a ton of money.  And like all real estate, the more stable the asset, the lower your yields will be.  The more risk you are willing to take, the higher the potential return, but also the more chance it will all crash down.