What to Do If You Are Asked to Price a Commercial Property for Sale

June 10th, 2011 by admin No comments »

In commercial real estate you are asked to price a property for sale almost every day. Price analysis and setting is different than valuation and is done for a different reason.

Pricing a property is usually done as part of taking the property to the market for sale. In this market the pricing of a property is quite hard given that the property market and the economy is changing week by week in some locations. The prices that properties sold at 2 or 3 years ago are not the prices of today; things have changed and property owners need to accept that. Prices have fallen across the board in most types of commercial, industrial, and retail property.

If you cannot price a property then it pays to let the market decide what the price should be. You can do that by using the following methods of sale:

  • Auction
  • Tender
  • Expressions of Interest

These methods of sale will let the market set the level of enquiry and the price. When you really do not have any idea about today’s property prices for a particular property then one of the 3 methods of sale is the best way to go.

If on the other hand you are to price a property today there are a number of factors that should really be considered in the process. Here are some of the main ones:

  1. Levels of enquiry currently for that type of property
  2. Quality of property improvements and age
  3. Upkeep of the property and structural integrity
  4. Environmental and heritage matters that can impact property upgrades or operation
  5. Tenant volatility or stability. Add to that the elements of anchor tenant occupancy.
  6. Current property usage and opportunity to change or redevelop
  7. Tenant mix and length of leases and how they impact the sale
  8. Existing lease incentives that are not discharged and that may impact the property cash flow at sale time
  9. Current building outgoings and relevance to the expenditure budget
  10. Vacancy factors in the property and the region
  11. Supply and demand for space in the area and for that property type
  12. Income performance from the property now and in the future, including rent review profiles and lease options expected
  13. Levels of current passing rent from the tenancies and if they are in line with market rent » Read more: What to Do If You Are Asked to Price a Commercial Property for Sale

No comments »

Posted in Commercial, Commercial Property, Real Estate

Tags:

Systems to Follow When Inspecting Commercial Investment Property

June 5th, 2011 by admin No comments »

As a real estate agent it pays to have a good approach to listing commercial property. A system to the process is a good idea. Not only will a system help you ask the right questions, but it will show your professionalism to the property owners.

When you are listing in a competitive market place it is highly likely that another agent or two will be inspecting the same property later in the same day. It thereby follows that the agent that is the most professional in the inspection process is highly placed to win the listing.

When times are busy you could be inspecting 2 or 3 properties a day for the purpose of listing. So a property inspection process is valuable to you in your listing conversions. I split the process into 2 levels as below.

My inspection process of a commercial, industrial, or retail property could be similar to the following:

The Preparation

  1. Check out the property title ownership detail before you get to the property
  2. See if any encumbrances or rights of way impact the property and if so how
  3. Get a copy of the local survey plan for the street and area
  4. See what the zoning and building codes do for the property
  5. See if there are any orders or notices on the property at the moment in the local building authority office
  6. Research the property sale and rental history over the last few years
  7. Review the tenant mix and lease profile from known leases
  8. Get details of recent comparable sales and rentals in the area
  9. Look for comparable properties in the same area that may be for sale or lease now and that could impact the marketing of the subject property
  10. What vacancy factors exist in the property currently?

The Inspection

  1. Check out the boundaries for the property and proximity to neighbours
  2. Walk the local street to understand visibility and access to the site
  3. Look at the signage of the property for identity and impact
  4. Review the building improvements for suitability and function. Are they what the market wants today?
  5. Get a copy of the tenancy schedule for review
  6. Ask about building income and expenditure performance (especially if the property is for future sale)
  7. Walk through the property with the owner or landlord whilst asking questions about current property performance
  8. Review lettable space and common areas for practicality and operation of the property investment
  9. Look for any vacancies and see if they are dragging down the function of the other tenants nearby
  10. Ask about anchor tenants if they apply in the property and get copy of the leases to see the terms of occupancy.
  11. Take plenty of photos that can help you later with notes and review analysis

When you inspect a commercial property for the first time it pays to have all the facts researched before you get to the property. In the actual inspection get more details from the property owner on current issues and concerns. As a general rule do not price a property at the inspection. It is far better to take the inspection information away for greater analysis. You can then formally present your findings to the owner at a later meeting. » Read more: Systems to Follow When Inspecting Commercial Investment Property

No comments »

Posted in Commercial Property, Real Estate

Tags: