Re: Which one is a better investment? - Posted by ray@lcorn
Posted by ray@lcorn on January 19, 2000 at 14:46:53:
Returns are a product of the relationship between price, equity investment, debt, income and risk (effort). Any property type can provide high returns by manipulating these factors to provide whatever return is desired. I have both types of properties you mentioned, and can tell you that I can make high returns on either with the right circumstances.
The real differences between property types are management and market. Narrowed to the two property types you mentioned, both office and retail depend on the same factors in a market to be successful: rising or steady population, solid per capita income, low unemployment, and a good location. So the deciding factor will be management. They are similar there also.
Small, single story office buildings are generally the easiest to manage. Retail requires common area maintenance and must accomodate high traffic. Office is usually leased on a net basis, which means the tenant maintains the premises, not including roof, systems and structure. Office is usually not quite as volatile as retail. When the economy slows, a retailer working on slim profit margins in a highly competitive environment will close or relocate quicker than an office operation not dependent on that day’s foot traffic to survive. Internet sales are also impacting the retail universe, but no one is quite sure how yet.
So my vote would go to office, assuming that the market has a demand. I will always prefer commercial (retail, office, specialty, etc.) real estate of any type against a residential income property, simply because of the management factor.
Hope this helps,