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DEFINING INVESTMENT GRADE REAL ESTATE
When the features of a property are considered appropriate for its intended use, the property is said to be investment grade real estate. The definition of "investment grade" is a moving target. Driven by market pressures to accelerate the development process, reduce construction costs and provide more (desirable) features than the competition, commercial real estate products are constantly evolving in terms of sizing, amenities, materials and construction methods. This makes it increasingly difficult to assess a property's physical features.
At the same time, amidst all this change, there are properties that continue to perform, year after year, as economic successes. To do this, they must balance economic return with user satisfaction in order to remain leased. There is a wealth of knowledge regarding the physical features of properties that, when aggregated, provide this balance. The compilation of these features for each of the major commercial property types defines "investment grade real estate." With this in mind, the definition can be taken to be "any property with an aggregate of physical features that fits an overall quality standard acceptable within it's competitive marketplace and that has a high probability of remaining economically successful throughout its life expectancy."
The combinations of physical features that are successful vary geographically and within competitive marketplaces, but for each property type certain commonalties are found. This chapter presents those features that I have observed to be common in economically successful properties. In this chapter, the important elements of each property type are presented. This includes the layout, sizing, amenities, materials, details of construction and on-going maintenance requirements for the major component parts............. specific features that define "investment grade" are presented for the following property types:
- Office Buildings - high-rise, low-rise and single-story.
- Hotels - luxury, convention & resort, business (downtown, airport and suburban), residential & extended stay, budget and suite hotels.
- Apartments - high-rise, mid-rise and low-rise.
- Shopping Centers - neighborhood centers, community centers, regional malls and power centers.
- Warehouses, Industrials and Flex-Space Buildings
- Senior Living Facilities - independent living facilities and assisted living facilities.
- Affordable Housing Projects - Low Income Housing Tax Credit Program, Section 42 of the Internal Revenue Code.
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