Looking for Your Next “Good Dirt” Investment?

In an interview with Bill Caruso, an associate director at Stan Johnson Co., we learn what characteristics are key to look for as a buyer in today’s market.

Globest.com: Can you explain the concept of “good dirt” as it relates to retail real estate?

Bill Caruso: I define “good dirt” as any property that has such inherent characteristics that if it becomes vacant, it’s not a question as to how soon it will rent again, but which tenant will pay the highest rent for it. With that said, the inherent characteristics that I typically look for in “good dirt” are traffic counts, visibility, access, and demographics.

GlobeSt.com: What role do demographics play in enhancing the value of real estate?

Caruso: Demographics play a huge role in value as tenants are looking at demographics very closely when deciding how much they are willing to pay in rent for a particular location. While most tenants are studying the 1- and 3-mile population trends, economic trends including job growth, and consumer spending habits when deciding where to put their next location, other tenants are looking further to the 5- and 10-mile radius demographics. Typically, the greater the density of an area and the greater the number of companies expanding or moving into the area, the better off you are.

Globest.com: What other nuances or characteristics quality a property as “good dirt?”

Caruso: As previously stated, traffic counts are a key characteristic. High traffic counts are ideal, but you also must have good visibility (i.e., corner lot) and access (ingress/egress) so that cars and customers can actually reach you. As an example, if you sign a lease with a bagel store for a parcel that is only accessible from the southbound lane, and the morning traffic is heading northbound, you may have a tenant who cannot thrive. It is also thought that locations near a freeway or other forms of transportation can benefit retail tenants. For instance, in an urban area, this could mean being near a bus or train stop, which could add to vehicle or pedestrian foot traffic.

Globest.com: What advice would you give to a buyer in today’s market who is looking for their next “good dirt” investment?

Caruso: You want to invest in a retail property that has high traffic counts and great visibility and access in an area that is dense and still growing in both population and jobs. You also want to do your due diligence and find out as much as you can about the target property, the surrounding properties, and the overall area. Is local growth forcing the municipality to consider a road widening project? How might that impact your property if eminent domain becomes a factor? Are there zoning restrictions or deed restrictions that could impact your long-term investment strategy? Do your homework before deciding a property is truly “good dirt.”