Commercial Real Estate is a type of real estate wherein the property involved makes money for the owner. There are several considerations that you need to take a look at if you’re planning to invest in commercial real estate.
Is the area saturated?
Following the economic downturn several years ago, commercial Cape Coral real estate agency investors started scooping up properties in the major markets including New York, Washington, Paris, London. As a result, of course, commercial real estate prices began to soar, making it increasingly difficult to turn a profit. Now many commercial real estate investors are looking elsewhere. One example is European real estate fund managing firm Benson Elliot, which has spent £100 million in the last quarter on property in Manchester, Cambridge and the northern town of Preston, all outside of London. It’s happening in the U.S. too. If you find yourself gawking at commercial real estate prices in the big cities, you may want to consider that same. Look at what happened to real estate values in Williamsburg, Brooklyn (just outside of New York City) since 2009. It all depends on just how badly you need that major city status.
What are the zoning laws and development plans?
It’s amazing how many commercial real estate investors find out they are handcuffed from doing what they really want because of zoning laws or the way the area is developing. Make sure your plans and aspirations mesh with the regulations and stipulations in area you’re considering. Find out if there are plans for adjustments to the city’s infrastructure that might affect commercial property—and if they pose any deal breakers. What are the noise ordinances? Will historic landmark status limit you from alterations? What kinds of businesses are off limits? What are the plans for parking? Pay a visit to the city’s Department of Housing & Economic Development (HED) and the Planning & Zoning Bureau online or in person.
Saturated areas will naturally yield more profit. The main problem, however, is that there are too many competitors. It will be very hard to establish a profitable commercial real estate due to the competition, and the main reason for this is the law of supply and demand. The higher the supply, the lower the price will be. Therefore, it is recommended to establish a commercial real estate business in less saturated areas, like minor cities and municipalities.
Zoning laws and development plans naturally affect the prices of commercial real estate. The observation of most experts are the more strict the zoning law, the lesser commercial real estate properties available. This may not always be true, but majority of the commercial real estate prices are affected depending on the aforementioned zoning laws and development plans and the prices will usually go up due to the scarcity of the said properties.
Finally, from a risk management standpoint, counsel needs to work with the client to determine the responsibilities of the parties on a variety of sticky topics. Over the course of several years, topics such as compliance with law and building codes, maintenance and repair of the premises, and other general liabilities (such as parties getting injured on the premises, what happens in the event of casualty or eminent domain) can and will become someone’s problem.
Risk management is present in almost all kinds of businesses. For Commercial real estate, it is necessary to consider the risks involved during the construction, development, marketing and the like. The higher the risk, the lower the prices will tend to be and vice versa.