CHICAGO-In the years leading up to the housing bust, retailers and retail investors were chasing rooftops further out into far suburbia and the cornfields. Easy money fueled this trend as urban dwellers sought to purchase new homes in fast-growing areas and retailers took advantage of good bargains on land and building costs.

Like many boom trends though, it proved to be unsustainable. The housing bust began and many areas were left with hundreds of vacant spec homes. Retailers that followed these rooftops found themselves at a loss and investors and owners struggled to hold onto their properties.

Lessons were learned, and, now retail investors are back in the market, making targeted purchases in strong, urban locations.

Investors want security. Instead of speculating on population projections, the wise move is to go directly to where population demographics are strong. Older, established urban areas in top-tier cities such as Chicago, New York, Los Angeles, San Francisco, Washington D.C. and Boston are now the most desirable locations for retail investment.

By targeting these established cities, investors are confident that quality properties have a much lower chance of experiencing market downswings. For example, L3 Capital recently purchased seven properties in two separate deals on Chicago's trendy Southport Avenue for approximately $20 million. The retailers are a mix of national chains, local restaurants and established local retailers.  

Yet investing in a location simply because it qualifies as urban does not make it a great deal. Risk can be found in any market and smart, savvy investors will know what to look for to ensure a solid investment. Here are five market dynamics all investors should research before making any urban retail purchase.

1.  Existing tenants in the market. Quality tenants flock to other quality tenants. Before purchasing a property, it is always good to take stock of neighboring retailers. They can be the best indicator of what kind of tenants, and rental rates, could be achieved.  

2.  Tenant interest. Before making a purchase, it is a good idea to talk to leasing brokers to learn their clients' thoughts on a property and the neighborhood. If retailers are interested in entering the market, it could be a good sign of stable or escalating rental rates.

3.  Transportation. In urban areas, access to public transportation is essential. Many urban dwellers tend to forgo cars and use public transportation as their main means of travel. If an area is not plugged into this network, whether via buses or trains, it may suffer from lack of exposure and destination tenants will pass it up.

4.  Profile of surrounding households. If you have a certain tenant base in mind, you have to find the demographics to support it. Be sure to check all available census data and market analysis of the surrounding residential population. Certain retailers can work for many situations, but it is best to know what your potential market would be before making a purchase.

5.  Rental rate trends. Knowing which way rental rates are trending is very important for determining the price of the property. If a property is in a good location, it can always be a good buy, but the trick is not to overpay based on current projections.

All of these points are important, but with retail investments, it still comes down to the most important real estate adage: location, location, location. Right now, that location seems to be top-tier urban cores, where demographics and foot traffic are strong and quality retailers want to locate.

Greg Schott is co-founder and managing principal of Chicago-based L3 Capital LLC. The views expressed in this column are the author's own.