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Commercial Q&A

Posted by Les Lopez on April 9, 2022
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COMMERCIAL Q&A

COMMERCIAL Q&A

As you might imagine, real estate agents field quite a few questions every day. People are naturally curious about our industry and it’s our job to guide folks through the often-complex world of commercial real estate. You might also imagine that some questions about real estate come up more often than others. Whether you’re a first-time buyer, repeat buyer, considering leasing a space or someone who could use a refresher on how deals get done, here’s are some answers to the questions that come up most often.

What does a commercial real estate broker do?

A commercial real estate agent or broker is a licensed professional who has been trained to help clients buy, sell or lease real estate properties. Commercial real estate properties are used for business or investment purposes and may include industrial property, warehouses and office buildings, retail space within a shopping center, or agricultural land. A commercial real estate broker may represent the buyer, seller, tenant or landlord and guides you through the entire transaction while helping you achieve your business goals.

Is commercial real estate similar to buying a house?

Commercial real estate transactions can be far more complex than residential deals and therefore require a different set of skills and knowledge. When buying or leasing commercial real estate, you’re more likely to run into things like:

  • Potential liability exposure
  • Zoning issues
  • Liens and title issues
  • Hazardous materials
  • Stringent insurance requirements
  • Intensive or time-consuming inspections
  • Complex contracts
Our company can not only help you navigate these challenges but will also make sure the property aligns with your business needs.

Should I buy or lease my commercial office space?

It depends on a number of factors. In general, buying makes more sense if you plan to stay in the same location on a long-term basis. But you’ll also need to consider other factors to determine the best option for your business.

A detailed cost/benefit analysis should take into account things like:

  • Up-front costs
  • Ongoing monthly costs
  • Opportunity costs
  • Tax benefits
  • Asset price appreciation
  • Growth in business equity
  • Income earned at the time of sale

As well as

  • Will you outgrow your space within 7 years?
  • Do you have time and resources to maintain a property?
  • Can you afford to tie up significant capital in a commercial building?
  • What is more important to you: flexibility or stability?
  • What are the current trends in your market?

If you’re considering a commercial real estate purchase, lease or sale, we can help you examine your specific situation and guide you towards the best decision for your business.

What makes a commercial real estate deal so different from a residential real estate deal?

Among many differences, the biggest is probably the due diligence period. For residential sales this is usually a quick 30-45 days with a quick inspection period within that period. On the commercial side of things, the inspection period is more extensive, and the due diligence period can last many months.

What is CAM?

Charges billed to tenants such as tax, insurance, and common area maintenance are known as triple net (NNN). The CAM is one of the charges that will be billed to the tenants in a triple net lease. There are several different structures that commercial leases can have. We’ll explain each of the available options to you and help you determine which would be the best to fit your needs.

What are tenant improvements and who pays for them?

Tenant improvements (TI) are going to be improvements requested by the user of the property. This will in most cases require permitting, plans and construction. The tenant improvements are usually paid for by the tenant, however in some circumstances the landlord will credit some of the cost for the improvements. This can absolutely be negotiated.

How do my brokers determine the sale price for my property?

Your broker will consider many factors such as the location of your property, the year it was built, the type of property it is and the size of the property. Kelly Harris Company takes a market approach to determine a property’s value, which means we are looking at recent sales of other properties that match many of the characteristics of your commercial property to determine the sale price.

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