Tips for New Commercial Real Estate Investors.
Buying your first commercial property is a major decision and though getting a great return of investment is never guaranteed, your decision to invest in commercial real estate can be a rewarding one if done wisely. As a first time investor, your level of preparedness can play a big part in the outcome of your investment.
You’re probably wondering – where should someone interested in investing in commercial properties start? Here are some smart moves you can take to help you make smarter investment decisions and have a better chance of getting the return that you want.
1. Define Your Goal and Your Target Market
It is important to understand first the market being considered and the type of property for investment. The real estate market in Cambodia has been growing in the past years so if you’re looking to invest for the first time in a commercial property, now is the perfect time. Understanding the market will help you identify the type of commercial real estate property you would be inclined investing in.
Your target market will mostly be the group of people that are financially capable and potentially interested in obtaining your product or service. By focusing on a specific group of the market, you can easily blend your business with their interests, trends, and gain an edge to other companies serving the same market.
Cambodia has developed a fast-changing market due to its fast-growing economy. As a result, income levels have drastically changed and the middle-class consumers are emerging from highly paid professionals to farmers that are now earning income. In this growth in earnings, it is mostly the young population that is leading the mass consumers.
More than half of the population in Cambodia are ages 25 below. A majority of youth that is worldly and tech-savvy. They are beginning to be aware of the technology and the world outside the country. In effect, this awareness changes their lifestyle preferences to living individually, with a keen interest in gadgets and the freedom to choose the belongings of a middle society.
Along with this, there is an increasing number of expatriates that also acquire high disposable income. In identifying your potential buyers in Cambodia, it is best to resort to a market that is large in number, growing and capable of purchasing.
2. Set The Property In A High Footfall Location
In business, it is no doubt that your consumers are the ones affecting the profit margin of a company. Thus, a significant factor that drives commercial real estate property is the location of the target market. After knowing what the market is, the next step would be finding out where they are. Whether students or employees, men or women, single or with family, the footfall must reasonably be continuous and prosperous.
This strategy is mainly to aim a location with a market that has enough disposable income to spend. If you find a thriving area for commercial real estate, then it’s much easier to achieve a business that will succeed in that location. Overall, a high footfall location can help a business to effectively build brand awareness and market itself by reaching numerous potential buyers right away.
Commercial real estate properties in Cambodia typically refer to retail space, office space, shophouse/warehouse, mixed-use, commercial buildings, villa, hotels, and industrial land. These properties are commonly found in urban areas with a wide catch of buyers. With residents earning 58% higher than the average income in Cambodia, Phnom Penh remains the city that acquires more populated buyers.
But, since congestion may pose a problem, especially in competing with other businesses, you can also consider underdeveloped areas that obtain a high number of visitors. For instance, the areas of Siem Reap, Battambang, Kampong Cham, and Sihanoukville have the largest population aside from Phnom Penh.
These cities may not be as wealthy as Phnom Penh, but it is rich in tourists that visit the place daily. Known for its tourist spots, Siem Reap attracts a wide range of foreigners wanting to explore the Angkor Wat. Likewise, Kampong Cham is famous for the Mekong River, which is among the longest river not only in Southeast Asia but in the world. Battambang, on the other hand, is known for its healthy agriculture.
In these cities, there’s a high demand for Western products which in turn cater to the high-class and middle-class population. By setting your commercial real estate property at high footfall location, you can still convert sales in areas that are not fully developed.
3. Transform Personal Connections to Business Relationships
The common deed for most developing businesses is to get a little tight with money due to limited resources. And for first-time investors, the most valuable solution is not taking a risk on adding figures to the existing supplies or finances. It is about building business relationships.
As a first-time investor, your initial action should be to call anyone you know that could help you with your future business. From acquaintance to family, you can consider anyone as a connection for even the slightest idea can contribute to the progress of your investment plan. Before entering the market, it is a practical approach to build a potential partnership from trusted connections.
Like many other Asian countries, Cambodia is built through personal connections turned to reliable business networks . A reliable source of contact is the European and British Chambers of Commerce. It is the only asset that does not require spending. Unlike cash that involves numbers, business relationships are not meant to decline but to multiply— in discovery, referrals, and business opportunities.
4. Fill The Gap In Available Commercial Real Estate
Walking through the city, you will see countless hotels, apartments, offices, industrial buildings, gas stations, strip malls, and the likes. These are all commercial real estate properties that are all located in one city. Look out for any development opportunity and ask yourself – what solution/product or service would be a good fit for investment? Upon knowing the most active market and location, the next thing to find out is which commercial real estate properties will make the best investment?
In the commercial industry, it is inevitable to have a business that does not have any competitors. Thus, it is important to study which demand of the market is served widely and which is not enough. This approach will help you know things that are lacking in the market. And from there, you can decide what commercial property to invest.
While traditional retail is still at the majority of sales in Cambodia, there is a big gap to fill in with luxury and mass market. The growing number of expatriate have influenced the Cambodians to develop a taste for new and luxurious lifestyle involving luxurious cars, mobile phones, handbags, clothing, and increasing importance on shoes. However, the availability of those high-end items is lacking, and this is where you can infiltrate the market.
5. Plan your Success and Execute it!
First-time investors are mostly impulsive in decision making. This is because they’re not earning enough money, they hate their job, or they want to be financially free at a certain desired age. As a result, they tend to see investing as a quick way to grow their money. They immediately jump to getting the business successful without considering factors that might affect the company in the long run.
But whether entering a small or big-scale business, the idea of opening a business itself is not easy. When everything gets overwhelming, go back to how you started the idea of investing in commercial real estate property. Plan ahead and do it. When done right, success will come naturally.
Startups and first-time investors usually have less or no idea about a business setup. From identifying the target market to finally deciding on your commercial investment, it is essential to execute these things step-by-step.
With a good plan, you can assess the viability of your decisions, track your progress, and improve on aspects that fall short. It may not promise you a 100% success rate, but it will warn you of the possible barriers to success, thereby giving you the power to avoid failure.