February 10, 2023
What is the Principle of Progression?
During the property acquisition process, our asset management team takes the principle of progression into account to assess the prospective property’s potential for success. The principle of progression in real estate refers to the notion that properties and the surrounding area will increase in value over time. This can happen for a variety of reasons, such as population growth, economic development, and improvements in infrastructure. Understanding and utilizing the principle of progression is crucial for REITs when evaluating potential investments in new properties.
When a REIT is considering investing in a new property, it is important to consider the potential for further development in the surrounding area. For example, when evaluating a property located in an area that is experiencing population growth, the demand for housing and commercial space in the area will increase. As a result, the value of the property and any income generated from it will likely increase over time. Similarly, if a REIT is considering investing in a property located near a planned infrastructure improvement, such as a new highway or public transportation line, the value and income potential of the property will likely increase as a result of the improved accessibility.
Armada Hoffler has a long history of successfully utilizing the principle of progression in our investments. One example is our investment in Town Center of Virginia Beach. When Armada Hoffler first invested in the project, the area was largely undeveloped. However, the Company recognized the potential for progression in the area, as it was located near a planned extension of a major highway. As a result of the improved accessibility, Town Center of Virginia Beach has become a highly desirable location, attracting a wide range of tenants and driving the value of the properties upward.
Progression is not only important for the current property value but also for future developments and income potential. With this principle in mind, Armada Hoffler is always on the lookout for potential investments in areas with strong potential for progression, such as those that are undergoing urban renewal or are located near planned infrastructure improvements. By investing in these areas early on, the company is able to take advantage of the increased value and income potential that comes with progression.
The principle of progression is an important concept for real estate investment trusts to consider when evaluating potential investments in new properties. By understanding and utilizing the principle of progression, REITs and others in the industry can identify properties with strong potential for growth and income, and take advantage of the increased value and income potential that comes with progression. By focusing on areas with strong potential for progression, Armada Hoffler has been able to generate strong returns for its investors over time.
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