Retail / Mixed Use in Up and Coming areas

[Micki M.]

I've been out looking at fabulous "main street" brick retail/mixed use spaces today in Canton, NC (which is West of Asheville and close enough that people are starting to pay attention). I've been around the commercial real estate world long enough to know that lease rates matter, and commercial space empties when the economy is down. I'm new to the area so I'm loving the prices on these buildings but I know that it's not a thriving retail area yet and rents are low, vacancies are improving but high enough to concern me. I'd love to hear from investors who have bought buildings before areas got hot and what your strategy is for holding these in the lean times.

On paper they're not great investments now, and it might be another cycle before they really gain value, but I see the trend and I'd rather buy something early in a market and be ready when rent rates go up. How risky does that sound? What factors would you consider when analyzing long term potential?

[Micki M.]

Just to clarify I'm looking more for advice on general holding of commercial property in a speculative area, rather than specific advice on Canton, but everyone's opinions are appreciated. I started out as a commercial leasing agent and I know what long vacancies look like. If the numbers make sense as an owner occupier that changes things a bit. Seems like the answer is have the reserves to be able to deal with a downturn.

As for Canton itself, I find the plant to be more of an eyesore than a smell issue. A landlord who has 50 rentals in the area told me half his tenants are Asheville refugees, and main street has quite a few new businesses coming in so we'll have to wait and see about Canton's future.

@Derek Robinson I do agree that if there is another market with similar prospects, better to go with the one that has less of an obvious downside.