8 Ways You Can Find the Actual Value to a Gas Station Business with Convenience Store

Picking your location comes down to few different factors, including what properties are actually available to you. In addition to feeling out what larger companies may be interested in going into business with you – if you demonstrate yourself to be a committed and capable individual – you are going to need to be able to find and either buy or lease a suitable property to establish your gas station business with convenience store.

The focus of this post very much due diligence. When you’ve finished reading through this, you should have a very clear idea of the research you are going to need to conduct to get a strong handle on the best property – the best site – for your gas station business with convenience store.

Before we go into detail, however, let’s look at property cycles and the effect that they have upon the value of real estate. The last thing you want to do with your gas station business with convenience store is to start off on the wrong foot, picking a business site that could, based on its value or any other related factor, essentially cripple your business from the start.

First of all, the pattern of a so-called idealized property cycle uses an adaptive expectations framework. Although there are relatively few books out dealing with commercial real estate alone (and you would probably be hard pressed to find a single book about gas stations specifically), you won’t be hard pressed to read upon property cycles should this strike you as an attractive past time. Yet, the bulk of the literature focuses on identifying a broad pattern among property cycles rather than focusing in on the nitty-gritty.

Generally, the stages and points of a property cycle are as follows:

1. The first stage is an upturn in business and development. This is the first point of the property cycle. Typically at a time of low interest rates and the availability of high capital, there is a rise in economic activity and an increased desire to make use of real estate. Since this stage is generally reached after a period of comparatively low levels of development. Space tends to be available as this point in the cycle is reached, however, the available space is absorbed quickly. Vacancy rates continue to fall and rents continue to rise. The so-called investor optimism increases as capitalization rates fall. These are the effects of lower interest rates, lower expected risk, and higher expected rental growth.
2. The second stage of the ideal property cycle involves the realization of the expected profitability of new development. New development that began during the first phase of the cycle continues and raises the value of land in the affected area. A real estate boom is in place as lending is now offered to those interested in undertaking what are considered to be speculative development projects. A lag is noted between the point at which construction starts and development is completed, nonetheless, what this means primarily is that there is a limited new supply of real estate reaching the market. As demand is still high and as yet unmet, rents and capital values continue to increase.
3. The third phase of the cycle is the point at which the equilibrium for supply and demand of available property is met and surpassed. Business enters a downturn on its upward spiral as overbuilding starts to become a problem. Real interest rates are rising by this point, primarily as a response to the real estate boom. Business cycles in response are turning downwards. The demand and absorption of new space has now leveled off and is beginning to fall. The new development that was begun in the pervious two phases has reached the market at last but since demand has fallen now, the vacancy rates have started to rise and rental growth is definitely faltering.
4. The fourth phase of the cycle is the point at which capitalization rates rise along with real interest rates. The principle issue is manifest in poorer growth prospects. Capital values are falling and as in the first stage, the valuation of the properties is relatively delayed.
5. The fifth phase of the cycle is adjustment as the fall in the demand for new real estate space finally comes in line with a peak in supply as the new developments are available. Vacancy rates are now rising above the equilibrium level and rent are falling in response to the gradual adjustments.
6. In the forth phase, developers cannot generate income to cover the interest payments. The completed developments and lower capital values have essentially put a stop to refinancing at this point.
7. Slump demand and development have become relatively low and vacancy rates have risen well above equilibrium levels.
8. The next cycle is in the works.

In most instances, the demand for property is determined by the need to have property to conduct a range of activities. The need to occupy property is generally established by the need to produce goods and services, for which there is a pronounced demand. The usual measure of this demand is related to output, expenditure, or employment in the appropriate sectors of the economy. Examples of services include employment offices, retail sales, manufacturing output, and warehousing activity in various industrial and commercial contexts.

When it comes to assessing properties, it is important to know that square feet are the units by which office, industrial, and retail properties are typically measured. Often, measurements are in either “gross square feet” or “net square feet”.

Unlike properties used for straightforward businesses, apartments, hotels and self-storage facilities are sometimes measured in square feet. Most often, however, commercial properties put to this use are measured based on the number of units or rooms. A standard apartment complex with 100,000 square feet would be better described as a property with 800 units. A hotel with 80,000 square feet would be more accurately described as a property with 300 rooms.

You will learn as well that the address, city, or state location of a property is rarely used to describe its location. The most common identifier for location is the submarket location of the property. In most locations, it is a specific region that determines the submarket.

 

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