Quick Guide to Commercial Real Estate

If you are interested in building long term wealth, then commercial real estate will help you achieve your goals. However, if you've never bought a commercial property before, it may be quite daunting. While navigating the ins and outs may be challenging, the right information will be a useful tool. 

This article will give you a guide to commercial real estate purchase. If you are a first-time buyer, then keep reading to find out what you need to know when you buy your first commercial property.

What Is Commercial Real Estate (CRE)?

Before diving into this guide to commercial real estate, it helps to know what this type of real estate is. CRE refers to property meant for business activity. Tenants rent out for work and not to live in. This is what sets it apart from residential property. 

It usually has a longer lease period which means more consistent passive rental income for you. It’s an appealing form of real estate because of the high returns and property appreciation.

Step by Step First Time Buyers Guide to Commercial Real Estate 

1.Know your options

If you are going to buy commercial real estate, you have to know the options available to you. Commercial real estate typically falls into four broad categories.

• Office

In this category, some buildings house different types and sizes of offices 

• Industrial 

This includes the larger commercial property, including warehouses and factories. It involves a larger outlay and is much more prominent on floor space.

• Multi-family rental

Multi-family rentals are buildings that you can rent out to many families such as apartments.

• Retail

Encompasses retail space for businesses that interact directly with clients, for example, shops and restaurants. 

2.Define your strategy 

Once you know your options, it's time to decide on your strategy. You have to ask yourself if you want to buy to keep the property for rental. Or if you're going to purchase and develop the property to improve its value for resale. 

You will also want to think about which type of property you wish to specialize in. A clear

3.Set up a budget 

The next step is to come up with your budget. As a novice property buyer, it's easy to pay too much for a property. The goal is to pay a fair price. Get experts, to give you a guide to commercial real estate prices. This will help you come up with a reasonable budget for the property type you are most interested in. 

The Canadian property market, especially office space, is quite appealing; hence properties move fast. Having a predetermined budget will help you make decisions quickly. That way you won’t lose out on many great properties.

4.Get some help

Commercial property can be quite involved, especially if you are doing it for the first time. It’s essential to get an expert to give you a good guide to commercial real estate purchase. Consulting with a tried and tested realtor will help you avoid complications. 

You might hit a lot of speed bumps while shopping for CRE. Having experienced people by your side will ensure success in your real estate journey. The temptation to avoid the expense of getting help is understandable. But getting help will save you more in the long run. 

5.Go shopping 

Now that you know what you want and how much you can spend, it’s time to start shopping for your commercial property. To begin with, look through property listings, you'll find a goldmine of available properties. 

While skimming through the listings, you should keep a couple of things in mind.

6. Location

It's important to determine if the location is ideal for your chosen property type. For most commercial real estate purchases, urban locations are the best. For retail property, a location with a vacancy rate of less than 5% is the most desirable. 

Slightly out of town locations with a good transport network are a better option for industrial sites. They are also much less competitive.

7. Zoning

Authorities classify specific areas for different business types. This is why you must know the zoning laws. Buying a building in an industrial area with the hope of turning it into a children’s play area, for example, might not be legal. 

Guide to Commercial Real Estate Property Due Diligence

Once you have your eye on a property that works for you, it's time to do your homework.

Property taxes

They do say only two things are certain in life and tax is one of them, as with anything else you have to pay the piper. On average property taxes around the Edmonton area are roughly 2.3%. You have to know how much you are going to pay in tax so you can plan ahead.

The state of the building 

An important consideration you should make is the state of the building. Will it need repairs? What kind of maintenance is required regularly? These factors come into play in the cost consideration and will also save you future headaches. 

It's important to get a thorough building inspection done so you won’t get any surprises. Find a guide to commercial real estate building inspection to get a checklist to use.

Funding 

Once you have all the information about a property, the next thing is to secure your funding. You don't want to lose out on a great property because you are still working out the kinks. So it's best to get the funding ready before you commit. 

Closing the Deal 

After all, is said and done and you have all the answers, it is time for the paperwork. Remember to read through the contracts, including the fine print. Enlisting legal help to give you a guide to commercial real estate contracts is a necessity at this point. You might want to make sure your contract has a due diligence clause, in case you discover something unexpected.

Final thought 

Despite COVID-19, the commercial real estate market in Canada is still a great long-term prospect. However, blindly diving into the property market might leave you frustrated and in a loss position.

Commercial real estate buying can be quite risky since it involves large amounts. The risk becomes even more prominent when you are not well informed. For a new buyer, the many considerations you have to make may be complicated. Use this guide to commercial real estate to equip yourself with the knowledge you need to make a right decision.

Getting the right property will have you well on your way to generating good passive income cashflows and lasting value. 

Even with a good guide to commercial real estate buying, looking for the right property may be overwhelming. We are here to help. Please have a look at our commercial listings and Contact us to find out more about our services. 

As an entrepreneur growing your business is exciting but leasing your first office space can be both thrilling and overwhelming. You know there is risks in business but mitigating the risks with an education approach will help you grow your business to success. Right now, you've likely been working from home, café’s, pubs and numerous other community areas. Whether you need that office space now, or you're looking, our experts have some free tips to make sure you get the right space for your business. Please call Guy Hebert at 780-445-4723 to view office spaces that might fit your needs.

1. Know Your Needs

Do you need space for your business or is it something you'd like? Some businesses will require a place to call their own but with technological advancements some businesses run just fine working from home or a cozy café. Having your business function and thrive in these alternative environments can save you a lot of time and money.

2. Business Location

How many times have you heard, "location, location, location" in real estate. This mantra does not only remain true for buying your property, it is true when it comes to leasing.

Choosing a prime location that will be easy to access and is close for your employees for commuting will not only impact your business directly it will make your employees happier which has numerous other benefits for your business. In fact, a study of 1000 people said the ideal commute to work was no more than 16 minutes.

3. Nearby Amenities and Services

When considering your first office space think about the desired amenities you'd like close to your business. Being close to a café, restaurant or other boutiques can increase foot traffic whilst keeping your employees happy. Being close to shops helps but thinking about your day-to-day activities is another factor. Often you may need to do regular visits to banks, or other meeting spaces.

Being relatively close to your employee's homes can broaden their modes of transportations. For these reasons it’s important to consider other factors such as parking stalls and a secured area for bike storage. With the increase of bike lanes and paths in St. Albert, Edmonton and other major cities more and more people are biking to work. If you do not have a dedicated spot consider a bike rack or storage space within the building.

4. Property Accessibility

When considering an office space how accessible do you want your business to be? Is the office building you're looking to get close to public transportation such as the LRT or bus stop? Is it close to a free way? How visible from the street will your business be?

5. Business Locations Affects SEO

These days Google is everything. From asking Google for directions to a friend's house or a local business. Where your business is located physically can impact you digitally. According to Snap SEO the ideal business location to better impact your businesses online presence is closest to the city centre.

With this in mind you'll be better positioned to rank better than your competitors.

6. Consider your Budget

Looking past your business location your monthly lease payment can be one of your business's largest bills. Knowing this it is important to set a budget and stick to it. Putting your company into debt or stunting its growth can be detrimental to business growth. Make sure you are clear and realistic on what you can afford. Perhaps you can forego a larger extravagant space for something cozier.

Consider the Expenses

When renting an office space there is extra expenses to consider. Your lease is just one factor when it comes to your budget but the added expenses can really add up. Consider other expenses such as:

• Property tax
• Phone and Internet
• Utilities (Power, Water gas)
• Insurance

Consider rent to own furniture

To cut down initial purchase costs it may benefit you to look into rent-to-own furniture to fill up your space. In the short term this is much more cost effective and allows you to modernize your technology when something greater and better comes to market.

7. Lease Agreements

Once you have picked out the property for your business you will want to look at the lease agreement. Having a lease agreement that is clear and concise will reduce a lot of headaches in the future. Make sure the lease clearly defines all the provisions. A verbal agreement between your landlord and you with some additional costs such as the power being included is just that – a verbal agreement. Having items in writing will protect both you and your landlord.

Who is responsible for building maintenance?

In your lease make sure it is clearly defined who is responsible for repairs. An unexpected water leak can damage goods and information. If you are responsible for repairs leave some extra room in your budget.

Lease Length

The length of your lease may vary in options from a year to five years and beyond. Locking in your lease for a long-term lease for multiple years may save you a dime but you want to make sure you will not outgrow the space. On the contrary you don't want to be stuck with a bill in case your business folds. Whatever the case it’s important to consider the term you want to carry for your lease.

Tenant Responsibilities

Before signing a lease read it over thoroughly. Scan it and ensure you clearly understand all your responsibilities as a tenant. As mentioned above you may be responsible for power, utilities and more while some locations may have them included.

8. Move Forward with Confidence

Taking your business to the next level requires you to collaborate with the right experts to get the knowledge right from the source. At Bermont Realty we are leaders in commercial leasing and have a huge selection to choose from. Feel free to drop us a line by going to our contact us page.