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Commercial Real Estate Value Factors

Commercial real estate investments can be in the form of multifamily properties, office buildings, commercial shopping centers, land or industrial property, etc. It is important for commercial real estate investors to be aware of the factors that impact the value of the property.

Here is a list of elements that affect the value of commercial real estate:

  • Miscellaneous Factors: Some features that play a role in determining the value of the commercial property are location, transportation (access to bike paths, highways, freeways, mass transit systems, etc.), vehicle ingress and egress, hard corner exposure, traffic count and surrounding property.
  • Interest Rates: If you are using credit to purchase commercial property, assess the rates of interest. Invest when credit is cheaper (lower interest rates) as this will result in lesser interest outlay and hence higher equity getting accumulated with time.
  • Population And Demographics: Invest in commercial real estate after studying the population and demographic trends of the area you wish to invest in. Consider factors such as age distribution, birth, migration, and education levels in accordance to the kind of business property will be used for.
  • Economic Outlook: Keep a tab on economic indicators that affect commercial real estate value. Examples of such economic indicators are household savings rate, job growth, real GDP, unemployment rates, wage growth, etc.
  • Supply And Demand: As per the laws of demand and supply, when demand is more than supply, chances are that the value of a property will escalate and vice-versa. So before investing, ensure there is enough demand to support your commercial investment and yield high returns.
  • Size And Facilities: In order to stay relevant and valuable, the commercial property should provide tenants with amenities such as co-working office space and other features that cater to their demands.
  • Market Performance: The performance of the commercial real estate market is influenced by the economic outlook, zoning and tax laws, population, demographics and other factors. Invest in municipalities that has favourable norms for business.
  • Branding: For commercial real estate to do well in terms of lease renewal, net property operating income, cash flow, and capitalization rate, work on creating a great brand. This can be done by enhancing the service level by investing in the latest exterior finishing, landscaping, an attractive and well-maintained parking lot, etc.
  • Potential For Redevelopment And Renovation: Commercial property with the potential for redevelopment has a higher value as it can be redeveloped to suit the changing demand of renters and market trends. A buyer should also have the option of renovating the property and adding to its value by using creative leasing strategies, professional property management services, updating the property, etc.

Contact the agents at John Reider Properties to understand the factors that affect the value of a commercial property. The agency offers a variety of services to commercial real estate investors. For further details on commercial real estate value factors, visit us at 455 E. Central Texas Expwy Suite 101, Harker Heights, TX – 76548. You can also contact (254) 699 – 8300.

Common Things Entrepreneurs Should Know Before Signing A Commercial Property Lease

Signing a commercial lease entails an entrepreneur to specific rights, responsibilities, and duties pertaining to the property. So, before signing and binding yourself to the same, you should be aware of everything stated in the lease.

Some of the major elements to consider before signing a commercial property lease are:

  • Research: Before signing a lease, conduct some research into factors such as current tenant dynamics, operation hours of other tenants and your business, the status of current vacancies, traffic patterns in the area, zoning laws, nuisance laws, availability of sufficient parking, etc.
  • Rent Structure: Review the rent structure to know how much you have to pay on a monthly basis, the rate by which the rent is expected to increase every year, etc. This information will be useful for determining your budget and figuring out whether the deal will be financially viable for you in the long-term.
  • Lease Terms: Weigh the pros and cons of a long-term lease versus a short-term one based on factors such as the amount of flexibility you require (to move locations), the area (whether it is an emerging area or a well-established one), etc.
  • Monthly Costs: Assess the amount of money you will have to spend every month before signing the rental agreement. Ask the property owner about the payment structure and terms of property taxes, insurance, interior/exterior maintenance, repairs, utilities, etc.
  • Statutes: Be aware of applicable statutes (depending on the state you are in) before signing a lease. You should know about the transfer structure: subletting and assignment of lease in case you plan to close down your business in future, personal guarantees (if your business defaults), holdover rent and non-disturbance agreement (to stay in the commercial building even if the property owner changes for any reason).
  • Common Rules: This refers to Covenants, Conditions and Restrictions (CC&Rs) set by the property owner for tenants. Before signing a lease, ask whether the commercial center has CC&Rs. If yes, then read them thoroughly and look out for rules about operation hours, noise levels, sign restrictions, etc.
  • Responsiveness: Judge whether the property owner is responsive to the needs of tenants, how after-hour emergencies are handled and other factors. For a clearer perspective on this, ask existing tenants about their experience.
  • Property Inspection: Ask for an inspection of the property before signing the lease agreement. Note down verbal agreements arrived at during the walk-through, click photos of existing damage if any, etc.

Contact the agents at John Reider Properties to understand things to consider while signing a commercial property lease. The agents assist the customers in choosing an ideal commercial property on rent. For more details on common things entrepreneurs should know before signing a commercial property lease, visit us at 455 E. Central Texas Expwy Suite 101, Harker Heights, TX – 76548. You can also call at (254) 699 – 8300.

Common Rules of Commercial Real Estate Investing

Commercial real estate investments such as office buildings, retail space, industrial sheds and warehouses are considered as a reliable source of regular income for many investors. Those who invest in commercial property benefit from its strong earning potential, long lease periods, price stability and other features. The process of investing in commercial real estate can be simplified by following certain rules that help in determining if it is a lucrative deal.

A comprehensive list of common rules for investing in commercial real estate are:

  • Location: The rent and appreciation of commercial real estate is dependent on its location. When investing in commercial real estate, ensure that the location is one that will attract more tenants and reduce vacancies.
  • Quality Tenants: Invest in a commercial property that is likely to attract quality tenants. The benefit of such tenants will be that they will be particular about paying their rent on time and stay for longer durations.
  • Capitalization Rate: The ratio between the Net Operating Income and value of property is referred to as Capitalization Rate. This rate is used to determine the value of property as per the current rate of return in the market. A minimum of 8 to 10 percent cap rate is recommended for property to be able to generate sufficient income for covering risks and expenses.
  • 50 Percent Rule For Expenses: As per this rule, the non-mortgage expenses (maintenance, vacancies and other charges) of commercial real estate should not exceed 50 percent. This rule helps in estimating cash flow every month and managing expenses accordingly.
  • Debt Coverage Ratio: Calculate the property’s DCR (Debt Coverage Ratio) i.e. the ratio of the Net Operating Income to that of the Annual Debt Service. Net Operating Income refers to the property’s potential income after deducting operating expenses, credit loss and loss due to vacancy. The Net Operating Income should be around 20 percent more than the debt service.
  • The 1 Percent Rule: This rule helps in estimating the worth of property being pursued. As per this rule, commercial property should generate a minimum rent equivalent to 1 percent of its purchase price as rental income.
  • Mix Units: Investing in diverse commercial properties builds your real estate value and generates consistent income for years.

John Reider Properties offers a variety of commercial real estate properties to its clients. Our team assists the clients in finding an ideal commercial property. We have years of knowledge and experience in commercial real estate market. To know about rules of commercial real estate investments, visit us at 455 E. Central Texas Expwy Suite 101, Harker Heights, TX – 76548. You can also call at: (254) 699 – 8300.

Choosing A Commercial Property Management Agency

Maintaining your commercial property is necessary to keep its value intact. This makes it important to choose an efficient property management agency. The right firm is one that provides better returns on your investment, helps in retaining tenants and increases the value of your property.

As per your personal investment objectives, following points should be considered when choosing a property management company:

  • Reputation: Research about the reputation, integrity and honesty of the agency you intend to hire for commercial property management. Consider how the agency manages its work and the level of commitment projected by its team of professionals.
  • Services: Check whether the services provided by the agency meet your expectations and fulfill your specific needs. Common services provided by a property management agency are management planning, financial reporting, budgeting, market rent analysis, rent collection, maintenance programs, etc.
  • Knowledge and Experience: Determine the number of years for which the agency has been working in the field of commercial property management. Ask for information on its background, resume, history, etc. See whether they understand your needs, tenant screening process they follow, whether they manage multiple properties, etc.
  • Management Software: A good property management agency is particular about using the right software. To get an idea about this aspect, see how the company integrates tenant information, maintenance requests and accounting.
  • Accessibility And Responsiveness: An ideal property management agency is one that is highly responsive and accessible when needed by a client. You can gauge this by the way you are assisted with your queries. The team should communicate in a respectful, enthusiastic and patient manner when discussing their policies and procedures.
  • Tenant Retention: A tenant retention plan can be a determining factor of a commercial property’s survival. Check with the property management agency about the efforts that they make to retain tenants during lease term and after the lease expires.

John Reider Properties is a renowned commercial property management agency. The team offers a variety of management services including on-site consultation, property inspection & maintenance, etc. For more details on choosing a commercial property management agency, visit 455 E. Central Texas Expwy Suite 101, Harker Heights, TX – 76548. You can call us at: (254) 699 – 8300.

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