The retail sector continues to prosper. Take a look at these selected news headlines from last quarter:
• $10M Hotel On Way On Mercer Property
• Northrop Awarded $43.3m Robins Contract
• Security Bank’s Acquisition Of Rivoli Bankcorp Completed
• Chain Store Sales Up 4.1% In May
• Kia Plant’s Groundbreaking In West Point/La Grange, GA Is Still Scheduled
• Mail-Sorting Facility To Open In Macon
These headlines reflect prosperity continuing in commercial real estate and the retail sector in Middle Georgia. The keys to the continuation of this prosperity lie in Macon’s location (between two interstates), Atlanta’s sprawl in our direction, and consumer spending. The residential housing market, on the other hand, thanks to rising interest rates, continues to slow from its growth of last year. As an aside, this should not portend a slowing for commercial real estate; if housing slows, rentals will increase, spurring apartment construction. Affected by rising energy costs, consumer spending should slow. Energy cost increases are a result of increased consumption of petroleum products due to increased manufacturing and expanding prosperity in the emerging (BRIC) economies, Brazil, Russia, India, and China. However, their manufactured goods must be distributed to markets; Middle Georgia couldn’t be positioned better to distribute those goods in the southeast U.S. In summary, our commercial prospects continue to look good.
Is It A Good Investment?
People are always asking me, “Is this a good investment? Should I buy or lease? Should I invest or not invest?” Unfortunately, none of us can predict the future, but we can use quantitative and non-quantitative analytical tools to minimize risk and calculate an expected return on investment based on known data. I think a quick review of some techniques might be refreshing.
There are four basic questions that must be answered to quantitatively analyze any investment:
- How many dollars are invested?
- When will they be invested?
- How many dollars will come out of the investment?
- When will they come out?
The answers to these questions will give us a rate of return. With this rate we now have all the elements needed to quantitatively analyze and compare investments. These are: the rate, the duration of the investment (time period), and the amount invested. Using Cost-Benefit, Present Value, and other techniques we can calculate break-even points, cash flows, internal rates of return, profits before and after taxes, mortgage payoffs, ratios of income to property value, and projected capital accumulations. Each of these measures has different importance to individual investors depending on their objectives.
For non-quantitative comparisons, a primary concern is: (The first three rules of real estate) Location, Location, Location. Analysis of Location is enhanced with known demographic and market data. What’s the trend in the region? What’s changing in the national economy? What’s happening within the state of Georgia? Will changes in Federal Reserve interest rates and national government policy make investment in the financial market a better return on investment than the real estate market? Which local government offers better incentives to attract development into their area? Will property taxes, crime rates, education levels, and efficiencies of local government services deter or attract development?
We have computer-assisted programs that allow us to change any and all variables to model the investment properties and see which is most beneficial. So to answer the question, is it a good investment? We have numerous tools, techniques, and information at our disposal and are ready to make them available to you to help with your decisions. Talk to us to find a property right for you.
John Strohofer
Commercial Real Estate Agent
Macon Commercial Office
478-746-9421
