Why Road Frontage On Commercial Property Is So Valuable
BATTLECALL GUEST EXPERT: Tony Seruga, Maverick
Real Estate & Contributor
How many feet of road frontage does the property have?
This question is among the most important when assessing the
value of commercially zoned property in a city or county. For some, the reason
as to why this question is so important may seem rather obvious. However, there
are multiple reasons why investors, developers, builders and business owners
want to have large amounts of road frontage on their commercial
properties.
For business owners, it is best for them to have their stores
located conveniently to their customers. If they are on a main highway or road,
they will have great visibility to the traffic going by. This can quite possibly
bring customers into their stores that they normally wouldn't see through their
normal marketing. Also, a customer new to the location can find the store much
more easily when in the line of sight. Visibility on major road frontage is a
huge advantage for the business owners and their stores.
Another reason
why business owners like to have their stores along major road frontage is
because of the ease in which customers can enter and exit the property. If they
are forced to drive through large parking lots, wind behind other major stores,
and park on a land locked parcel, there is a possibility that the customer would
go to a more easily accessible competitor.
Now, this may be pushing it a
little, because a business should be able to bring customers in on its own
through effective marketing and good business practices. However, it is
definitely more pleasant to access a place of business that is right by the
road, rather than search your way through parking lots, other businesses, and
who knows what else. The easier the access, the more enjoyable the experience is
for the customer.
The two main reasons for business owners to
have their stores on major road frontage are visibility and ease of
access.
Let's look at why investors, developers, and builders all want the properties
they are involved with to have the greatest amount of road frontage
possible.
These three people, investors, developers and builders, are the
foundation for commercial real estate. They have the money; they have the
vision, and they, ultimately, are responsible for building our
communities.
More often than not, these people will choose properties to
invest in that have the most amount of road frontage, or create the roads so
that the office complexes, retail centers, and strip malls have the visibility
and ease of access that business owners look for in a profitable commercial
property.
The underlying advantage for these investors to develop and
build properties with major road frontage is the fact that these commercial
properties, known as out parcels, are far more valuable than the land locked in
parcels behind them! The difference between these property values can be quite
drastic.
For example, recently I was assessing a 56 acre raw tract of
land in Rome, GA. It had over 2,000 feet of road frontage on a major highway!
The front of the property was zoned commercial, while the back was zoned
multifamily. After speaking with the broker and looking at comps (comparable
sales), it was clear that the out parcels would be valued at approximately
$600,000 an acre developed. (They could be worth more if we were able to get
national brand stores on the property). However, those in parcels, without the
road frontage, would only be valued at $225,000 per acre. This is a $375,000
decrease in value simply because those in parcels are a few hundred feet away
from the actual highway.
This news greatly cut into my overall profit
margin.
Not all cases are this extreme. However, it is always true that
an out parcel will be more valuable than an in parcel. That is why investors,
developers, and builders all want property with major road frontage. It is
simply more valuable!
Business owners and investors alike will gladly
choose a property with major road frontage over a land locked parcel, or a
parcel with little to no road frontage. Use this important fact when you assess
properties and the value that they hold.
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