Three Common Pitfalls To Avoid in Commercial Real Estate

If you’re in the market for a new commercial real estate property, it’s an exciting time! No doubt you have many dreams of where your new business and building can take you. Always be sure that reality and your goals align, however. It can be tempting to overlook certain things because there’s other aspects about a building that we love, or to ignore other troublesome signs that may appear. Sometimes, we don’t even know how to look for troublesome signs! The most successful transaction is when the buyer and the commercial property are a good match for what the buyer has in mind. There are many things that can be done to change certain factors about commercial properties (such as renovations) but other things will not change (such as location in a high crime neighborhood, despite being a beautiful estate!) Your real estate agent wants you to have a successful future in your commercial property, so it’s best to keep three common pitfalls in mind.

Misjudging How Much Space You’ll Need
Choosing the Wrong Location
Making An Emotional/Impulse Purchase

It’s actually fairly common to misjudge how much space you will need, particularly when you have never had experience with commercial real estate before. Purchasing a place that is too small or too large are both major errors, for different reasons. If it’s too small, you may not have enough space to even house your employees, not to mention do business, and if it’s too large, you will be paying astronomical utility bills and may find yourself in financial distress. If you know for a fact you will be expanding your business, too much space may not be a bad thing, if you can afford the upfront costs – just make sure you have a clear 1 year and 5-year business plan, preferably with a CPA or advisor, when you make a purchase.

Location really is everything for the prosperity of a business. It needs to be conveniently located for your customers/tenants, but you also need to consider things like zoning, ordinances, taxes, the availability of parking, and where the majority of your employees live and/or go to school, if you employ a lot of college-aged people. Keeping your demographic of both internal and external customers in mind is very important for the well being of your business. Is the location safe? What are insurance rates for the area? These all need to be investigated, and are highly dependent upon location.

Emotional reactions to commercial properties are common – just as they are to residential properties. You see a property and say, “Oh, I love it! This is the place!” Maybe it really is, but you need to take a few days to let your emotions cool down while you investigate details and if the property meets your needs, and also be sure to get a few trusted professional opinions about how well the property would work for what you have in mind. Your gut reaction may be exactly right, and if so, that’s wonderful. Taking a few days to make sure won’t hurt anything.

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