Commercial Buyer Representation Services
Whether you are looking to buy a commercial property in which to operate your growing business, or are looking to buy a smart investment for your real estate portfolio, you have come to the right place. We have the tools, connections, and market expertise to help you find just the right property to fill that need. Searching for commercial property is a much different process than residential, and takes a brokerage and agents with access to the right tools to get the job done.
We start off the process with an in depth interview with you and your team to dig deep into your needs and goals. We then tailor a custom program and set realistic expectations and timelines. We will bring in our own team of attorneys, architects, land use experts, and engineers (if needed), to help guide you through the process. Our goal is always to ensure the best and highest use for your commercial property, along with greatest overall return for your real estate portfolio.
Commercial real estate has been one of the primary vehicles of wealth creation for centuries and continues to be a lucrative investment with more stability and safety than the stock market. Many people like the fact that it is a tangible asset that they can drive by and see versus paper assets that are intangible. Also, many business owners like to own the real estate for their businesses, rather than make a landlord rich.
As you might expect, commercial properties are a departure from traditional singlefamily investments. From crunching numbers to raising capital, buying commercial real estate will require more out of a buyer. That said, with the right dedication and team you can learn how to take on more complex properties. The following guide will walk you through how to buy commercial real estate and help you get started putting the pieces together.
Office buildings are generally categorized into two types: urban or suburban. Urban office buildings are found in cities and include skyscrapers and high-rise properties—some may even total as much as a few million square feet in size. Suburban office buildings are usually smaller in stature and sometimes grouped in office parks.
Office buildings can be multi-tenanted or single-tenanted, and many are build-to-suit. They’re also ranked into three tiers: Class A, Class B, and Class C.
Class A Office
Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high-quality standard finishes, state-of-the-art systems, exceptional accessibility and a definite market presence.
Class B Office
Buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area. Building finishes are fair to good for the area and systems are adequate, but the building does not compete with Class A at the same price.
Class C Office
Buildings competing for tenants requiring functional space at rents below the average for the area.
Medical office buildings are a specialty sub-sector in this space.
Retail comprises the properties that house the retailers and restaurants we frequent. They can be multi-tenanted (often with an anchor, or lead tenant, that serves to drive traffic to the property) or single-use, standalone buildings.
The retail sector is complicated, as the type of shopping center —for instance, a regional mall, community center, strip center, or power center—is dictated by many metrics, including the size, concept, types and number of tenants, and trade area. Single-tenanted buildings you may come across include big box centers (usually with a national chain like Target, Walmart, Best Buy, or Dick’s Sporting Goods) or pad sites (single-tenanted buildings within a shopping center, often a bank, restaurant, or drug store).
Industrial buildings house industrial operations for a variety of tenants, and are mostly located outside of urban areas, especially along major transportation routes. The lowrise buildings can also be grouped into industrial parks. The properties are categorized into four types:
The multifamily sector covers all types of residential real estate outside of single-family, including apartments, condos, co-ops, and townhomes. Like office buildings, multifamily properties are often classified into Class A, Class B and Class C.
Apartment rental buildings, in particular, are split into multiple property types. Freddie Mac has separated them into six different buckets:
The hotel sector covers establishments providing accommodations, meals, and other services for travelers and tourists. The hotels may be independent (boutique) or flagged—the latter means it’s part of a major hotel chain, such as a Marriott or Sheraton. Real Capital Analytics splits them into six separate categories:
6. Special Purpose
Special purpose real estate may be owned by commercial real estate investors, but don’t fall into any of the sectors mentioned above. For instance, amusement parks, churches, , and bowling alleys are special-purpose facilities.
7. Mixed Use
Mixed use is exactly what it says. It’s a combination of two or more of the other types of commercial real estate on one lot or in one unified development. It is generally found along transit corridors in busy cities. The most common occurrence is ground floor retail with either apartments or office above the retail. There are some high rises that may have ground floor retail with a mixture of office and condos or apartments.
Commercial Land is land that has been zoned or designated for commercial use.
Buying commercial properties can be thought of similarly to purchasing residential real estate, but on a bigger scale. Investors will still need to conduct sufficient research and perform due diligence and inspections; but there will be differences in the numbers. Commercial properties often equate to higher purchase prices, longer leases, and increased rental income. To prepare for these differences, investors should ensure they have the right systems in place. Not surprisingly, as you gain experience you will become more comfortable analyzing properties and landing deals.
If you want to start purchasing commercial real estate, or you simply want a better idea of what to expect, consider the most important steps in the commercial real estate buying process:
1. Ask Yourself Why You Are Investing
Before you can even consider buying commercial real estate, you need to ask yourself why you are doing so in the first place. There is no point in investing in a commercial asset if you don’t know what you hope to accomplish. Instead of investing first and determining what you want later, try identifying your “why” first. Determine what you want to accomplish, and then search for an investment that can help you achieve that goal.
2. Consider Your Options and Property Types
Commercial real estate is a broad term, and can include everything from retail shops, industrial complexes, office buildings, large apartment buildings and a whole slew of other types of commercial real estate. In other words, commercial real estate is property used for business purposes. It is, therefore, in your best interest to determine which type of commercial real estate you want to deal in. To help you with your decision, remember why you are investing in the first place.
3. Secure Financing
Try to before you even start looking for a commercial real estate property to buy. That way, you’ll not only know how much you can afford, but you will be able to facilitate a deal faster and more efficiently with the money “in hand.”
4. Align Yourself With The Right People
Real estate is a people business, and buying commercial real estate is no exception. You will want to make sure you align your services with the right professionals. Consider hiring a commercial that specializes in the types of transactions you hope to complete, a commercial real estate attorney well-versed in the laws of commercial real estate, and even a certified personal accountant (CPA) to make sure the deal goes according to plan. There are a number of professionals that can help, so don’t be afraid to ask for assistance. The right partners may be the key to landing the deal of your dreams.
5. Find A Property That Meets Your Criteria
With everything in place, begin your search. By now you should know your criteria; stick to it. Remember why you are buying commercial real estate, and look for a property that can get you to the finish line. Remember, there’s no reason in buying a property that doesn’t help you realize your goal, no matter how good of a deal it may seem on the surface.
6. Perform Due Diligence and Inspections
Again, buying commercial real estate isn’t the same as buying a single-family home. Before you proceed, perform due diligence. Run the numbers and analyze the deal as a whole. Are the inherent risks worth the potential rewards? Is there another property that would be better suited towards your goals? Now is the time to analyze every detail. Only move forward once you are certain the property will be beneficial to your portfolio. During the feasibility period make sure you obtain current financial statements as well as the actual leases, receipts and statements so that you can verify the accuracy of the financial statements. Get a good property inspection to ensure that all of the mechanical systems and structure are in good working order.
7. Close The Deal
Once you find a property worth pursuing, be sure to make an offer with a feasibility clause. More specifically, make an offer with an inspection contingency that gives you an out in the event the commercial property doesn’t pass the inspection. If everything looks good, continue to perform due diligence by getting the appropriate insurance set up and reviewing all included documents. There’s a lot that goes into a commercial real estate transaction, so make sure you are prepared.
I want to make it abundantly clear: this is by no means a comprehensive list of every step associated with buying commercial real estate. It is, however, representative of some of the most important steps you should never forget. To be clear, you should consult a professional before moving forward with your own commercial real estate purchase. Having the right Broker to guide you through your first few deals is crucial.
Yes, buying commercial property has proven to be a smart investment for those who know what to expect. The income potential alone is what draws so many real estate investors to this asset type. Commercial real estate is known to have a higher return on investment when compared to residential properties. Aside from the profitability, buying commercial real estate can also lead to stronger professional relationships, more flexible lease terms and limited business hours. Investors who opt for commercial real estate will also enjoy attractive financing options and equity appreciation.
In order for commercial real estate to be a smart investment, there is one thing you will need to look for first: an experienced commercial real estate broker. Nothing else will be worth as much to your search or help you over the course of a commercial real estate deal more so than a professional that is well-versed in commercial real estate. And while their services will certainly set you back (somewhere in the neighborhood of six percent of the purchase price), I can assure you it’s usually worth it. A great commercial real estate attorney will help you every step of the way, from finding a deal to
negotiating terms and prices. In fact, it’s entirely possible for a good agent to save you more money than their services cost.
Once you have a commercial real estate professional on your side, begin to explore the different types of commercial properties on the market. Whether you realize it or not, there are significant differences between office buildings, industrial properties, retail properties, apartment buildings, and every other type of commercial real estate. It’s in your best interest to know them all. Be careful to vet the options made available to you. Look at the types of commercial real estate up for sale, and determine which type of property suits your needs. What the property is zoned for will have a big impact on how you proceed, so it’s best to know what you are getting into ahead of time.
At this point you may still have questions about commercial real estate, and that is okay. Learning to take on more complex investing strategies takes time and research. If you still have questions on how to buy commercial property, there are resources you can use. The following questions about buying commercial real estate can help:
Why is the owner selling in the first place?
Not unlike every other investment strategy, buying commercial real estate will work out more often than not for those that perform due diligence. More importantly, the more you know about a respective deal, the better off you’ll be, and the reason behind the sale is no exception. That said, uncover the exact reason the current owner is intent on selling. Not only will the answer be able to help you in negotiations, but it could point to any red flags that are best left avoided. Just remember one thing: sometimes the best choices you make are the ones you don’t make.
Why should I invest in commercial real estate over single-family homes?
Commercial real estate boasts one benefit that single-family homes have a hard time matching: the value of scale. Due to the sheer size of most commercial buildings, at least as they compare to traditional homes, commercial buildings offer the potential for larger profits. It is also nice knowing most of your tenants will have a vested interest in the property, which means you are less likely to deal with unruly tenants. Business owners are typically more inclined to treat the property with respect because it is, after all, their own livelihood.
Learning how to buy commercial properties has become the next logical step for many investors that have grown comfortable dealing in single-family homes. If for nothing else, commercial real estate represents the next challenge or exit strategy that can elevate your investing career to an entirely new level. While buying commercial real estate can certainly coincide with amazing benefits, it’s not without a few downfalls: risk, difficulty, and the sheer volume of capital required to deal in commercial real estate can all impede an investor’s progress.
It is worth saying, however, that buying commercial real estate is not impossible. Not unlike buying single-family homes, there’s a process; one that, if followed correctly, can result in amazing benefits. That said, you must know what you are doing if you hope to realize success in the commercial industry. Jumping in without a plan is the surest way to sabotage your own efforts and ruin everything you worked so hard to achieve.
If you want to successfully make the transition to commercial real estate familiarize yourself with the commercial real estate buying process. Here are a few buying commercial property tips to help:
There may come a time when your real estate investing business outgrows your home office or rental space. Or perhaps you are just tired of paying rent so that your landlord can build wealth. When this time comes, the next logical space is typically to purchase a commercial space for the business itself. In fact, according to a study from Bank of America the small business sector occupies 30 to 50 percent of all commercial real estate spaces. However, many business owners get stuck on one main question: how do you find the right commercial property for your own business?
The answer is actually much simpler than you think. Each of the processes laid out above, still apply to a commercial space being evaluated for your own business. You need to look at the market, the different financing options, and the potential return on investment. After considering these aspects of a commercial property, business owners must then take it one step further: putting themselves in the position of a potential tenant. Imagine how your business will fit into the space. Is there enough parking? How will the office be laid out? Is there room for future expansion?
Evaluate the needs of your company one, five, and ten years down the road before looking at properties. Consider what type of financing you will use for the deal. After you have acquired this information, begin looking at properties that fit these needs. You may find that searching for the right commercial property for your business takes longer than finding one for a buy and hold deal. Even though the process is similar, the timelines can vary drastically. Keep this in mind and be persistent in your search, it could pay off in the long run.
Buying commercial real estate can certainly be well worth your time if you do it correctly. Savvy commercial real estate investors have already proven that it belongs in a wellrounded portfolio, but I digress. For as beneficial as it can be to own commercial real estate, it can be equally devastating for those that go in without a plan. If for nothing else, commercial real estate investing comes with risks for those that act irrationally. Poor investment practices could result in devastating problems, and they are only magnified by the size of commercial investments. Therefore, it pays to have a sound plan in place. With proven systems on your side, you are more likely to avoid the pitfalls of commercial investing and realize success.
With over 70 years of combined experience, the Cooper Advantage Group has the experience, skills, and connections to make sure that we can handle all of your real estate needs.Contact Us