How to SWOT your next commercial investment

Everyone thinks that Byron bay is some idyllic paradise.

I saw a funny thing the other day where a young lady from overseas was in Byron on holiday and she bumped into Chris Hemsworth just hanging out with his shirt off…

…As you do.

She was blown away that we have free range Hemsworths just roaming around. That’s the thing with Byron. On the one hand it’s a hippy/surfer community filled with transient travellers. On the other hand it’s becoming a bit of a millionaires playground with movie stats and the super rich buying into the area.

The funny thing is that Byron has the beach on one side and wetlands on two sides.

Because of that topography there is very little scope for Byron to grow. There’s no more land and there’s only so much you can do to increase density… After all no-one wants it to become a high-rise jungle like Surfers Paradise. The locals are VERY clear about that!

It means that as more of the rich and famous buy into the area the price will have no choice but to be forced up.

One cool thing though is that in the industrial area of Byron it means that having vacancies is rare and very short lived. In fact there are people who are converting areas of the industrial area to have some residential.

They’ve been able to pull this off by using an old law about having a “caretakers” residence. It’s kind of a loop hole because the council are not really wanting people to live there…

Usually industrial and factories are not my thing when it comes to investing in commercial but when it comes to a place like this it’s kind of a captured audience.

If you buy industrial here the can’t just open up more land and start building new industrial estates.

Now this is not unique. There are other areas that have situations like this and other industries and property types that have their own limitations.

Looking for these limitations should form one part of your due diligence.

When you do a SWOT analysis (Strengths Weaknesses Opportunities and Threats) for a business you look for things that could be threats or opportunities to your business.

So when you are investigating a commercial property is serves you to think in the same way.

In our example there are some industrial areas that are on the end of town and bordering rural land. It’s easy for the council to open up that rural land to open up the space for more factories.

In Byron that can’t be done… we’re all out of space.

This is why I’m a fan of retail. Usually retail shopping centres are in the centre of town surrounded by residential. This means that more retail land is not easy to open up. It’s already blocked in by houses.

Retail has other threats however. Large shopping malls can be built which takes business away from smaller traders.

In this case you need to find out if the town or area has plans for these sorts of developments (or if they are even big enough to support it).

It all comes down to supply and demand.

Is there are demand for the type of property you’re looking at and what are the supply levels now and on into the future?

The more your property is to the left of the equilibrium line the more demand there will be for your property.

However the further left you go… the more demand there is and the less supply… the more pressure there is on the local council to find a solution for providing suitable property to fill the demand.

That will increase risk… unless you live in Byron where more is not really possible.

Clearly there’s no hard and fast rule… every property will land somewhere in the graph and it’s up to you to work out where and what that means for you.

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