Beware of these 5 Pitfalls While Looking For Commercial Real Estate

Ask anyone who has had a successful track record while investing in real estate and they’ll tell you it is not an easy task. This is even more applicable when it comes to commercial real estate. Since this is a tricky segment it is mostly dominated by professional investors and the likes, as you are seldom likely to see individual investors. However, this is not to say that individual investors cannot be successful at purchasing worthwhile commercial real estate. The process involved is a little more arduous and involves taking into consideration several factors.

So before taking the plunge into the commercial real estate industry, have a look at the top 5 pitfalls that investors, be it businesses or individuals, often fall into:

Utilities:

This is a first in the checklist when buying a commercial property. Buyers must ensure that all basic utilities such as electricity, water, sewage, garbage disposal and phone / internet lines. These are basic amenities required for any establishment to survive and potential buyers must ensure that they don’t fall short on any of these essentials. If buyers fail to inspect these factors they would be taking a huge risk. After all even if one of these utilities aren’t available, then commercial establishments will not willing to lease these properties and this would result in a reduction in property and rental value.

Usage Restrictions:

This is critical for both sets of investors – businesses who are looking to move into the property as well as investors who are looking to lease out commercial properties to businesses. Buyers must take into considerations what kind of businesses or what kinds of activities are not permitted in the building premises. In some instances, certain kinds of equipment or machinery may not be permitted to be used in a commercial complex. This can pose restrictions on which kind of businesses you can lease the property out to. It is ideal if buyers research what sort of restrictions and limitations are being posed by the building association or even by the government (in the form of zoning). Your plans can be drastically altered if you discover these facts at a later date.

Location:

This might seem like a fairly obvious one. Unlike in a residential home, where compromises can be made by homeowners to trade better facilities/pricing for location, this will not work for commercial real estate. Location is of prime important, as businesses will want to be in a prime location that is easy accessible to all its employees. There can’t be any compromises on that can there?

However, commercial real estate investors must look beyond this. It is obvious that a commercial property must be in a prominent and convenient location to be worth something. However, the big questions is will the location of the property remain relevant for years to come? This is the question that buyers must be asking themselves. Real estate is a long term investment play, so one must take into consideration what will happen in the future.

Sure, today a commercial property might be in a prime location and there can be a huge demand for it. However, due to changes, say for example a new business zone sets up in the opposite end of the city businesses will want to move to that zone. So investors must always consider these factors and stay knowledgable about how about potential commercial trends across the region in order for their investments to be successful.

Accessibility:

One of the most important factors for a business to setup shop in a location is accessibility. Commercial establishments are actively on the lookout for properties with good locations. This is critical both from employment as well as the business perspective.

Moreover, in order to attract the best talent in the region and to also make commuting easy for employees, businesses and commercial establishments will expect their properties to be located in zones that are easy approachable by road or have a great connectivity to transportation options like buses and trains.

Commercial establishments will also like to be on the right location in order to attract a wide number of customers. Commercial establishments ideally target areas that are sandwiched between residential and office/industrial zones, as these areas will see a high amount of traffic and commuting, which will give them better visibility and attract more customers. Also typically successful locations are situated in crowded intersections or along major highways.

For business customers, the opposite is true. They wouldn’t want their establishments near a crowded highway. Ideally business customers will be looking to set up an office in an area that has three or more residential neighbourhoods with considerable population within a 10 kilometre range. This would be the perfect distance for employees to commute by car and bus/rail transportation also would be for a very short period.

So keep these points in mind when analysing the location and accessibility of your commercial property.

Geography:

This involves two major components – zoning and topography. Buyers often commit to properties without realizing the kind of topography that their property is built on. The ideal topography ought to be a flat land with good access. However, beware when buying a commercial property in an uneven piece of land or in a hilly area. This could lead to problems as the way the property has been built may not be suitable for these kinds of topography. So make sure that you check the topography of the region before you commit to a property.

Secondly, buyers must also be wary about zoning. This can be critical, as you may intend to buy a property for a particular use and then later realize that the property is in a zone that doesn’t permit the intended activity. For example in most cities and towns, the local government deters people from starting commercial establishments in a residential zone by zoning. In some cases, zoning conditions may be relaxed, but it is important that you check before you make a move.

So, now with this explanatory guide you are absolutely ready to invest in commercial real estate in the most knowledgeable and comprehensive way! What’s more, your experienced, accomplished and skilful realtor will guide you towards the best investment opportunities in real estate in the most definite way!

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