Commercial real estate isn’t just about finding the right space for your clients. It entails a lot of other factors, too. If you’re looking to buy commercial real estate (CRE), there are some things you must know in order to be successful and make significant profits. Here’s a list of the top five things you need to know about commercial real estate.
1. There are different types of analyses involved with real estate
CRE professionals go about certain analyses in different ways. Below are the different types of analyses associated with CRE:
- Property analysis: A commercial property analysis is perhaps the first step you’ll take towards deciding whether to buy a property. It involves considering the numbers (e.g. sale price, square footage, etc.), learning the unique history of a property and deciding whether the property is worth the investment.
- Owner analysis: This analysis involves gathering information about the property owner, such as their name, address and contact information.
- Investment analysis: This compares one investment to another to determine which is the more valuable investment.
- Portfolio analysis: A portfolio analysis includes looking at the properties in your portfolio and identifying any investments that may be underperforming, which may lead you to pursue another investment to offset those losses.
- Financial analysis: This involves considering the financial obligations that come with investing in a particular property, such as construction costs, management fees, existing tenants and vacancies.
- Market analysis: This looks at trends in the industry such as employment rates and median cost of housing to help you get a feel for local supply and demand and for a property’s potential to generate revenue.
- Industry analysis: This analysis helps reveal how the industry is performing to help you identify certain market trends.
2. Crowdfunding has made it possible for small investors to own commercial real estate
For some time, CRE has been inaccessible to non-wealthy investors. Coming up with large sums of money to purchase CRE can be a daunting task. However, thanks to crowdfunding, which involves a group of investors pooling their money to buy a commercial property, it is now possible for small investors to own CRE.
3. Millennial buying habits are changing demand for warehouse and retail
Millennial spending in the United States is expected to reach $1.4 trillionby 2020. Commercial real estate investors should look into investing more in retail stores and warehouses not only because many millennials have big spending habits, but also because over half of them prefer to primarily shop in physical stores.
4. Different asset classes have different returns over time
As you’re likely aware, there are different CRE asset classes, from multifamily to retail. Each one tends to generate different levels of revenue. These differences may vary over time. For example, a building with a single tenant may have a lease that is about to expire, while another building may have a new 10-year lease. The latter is worth far more than the former.
5. All square footage isn’t created equal
While you may think a CRE property is a good size, you have to remember that not all markets measure buildings with the same system. Because of this, you could be paying for space you can’t use. For example, other parts of an office building could be included in the square footage, but you can only use a portion of that space.
About Berger Commercial Realty/CORFAC International
Berger Commercial Realty/CORFAC International is a regional, full service commercial real estate firm based in South Florida. Independent and privately owned since its founding in 1998, the firm is a member of CORFAC International, a global network of independently-owned commercial real estate brokerage firms. The firm’s property management and brokerage services include tenant/landlord and buyer/seller representation; project and construction management; receiverships; agency/project leasing; capital advisory/investment sales; retail services and more. For more information, visit www.bergercommercial.com.
About CORFAC International
CORFAC International (Corporate Facility Advisors) is comprised of privately held entrepreneurial firms with expertise in office, industrial and retail real estate leasing and investment sales, multifamily property acquisitions and dispositions, property management and corporate services. In association with global affiliates, CORFAC International has 60 North American offices and 20 offices in global markets. Founded in 1989, CORFAC firms completed more than 11,000 lease and sales transactions totaling approximately 500 million square feet of space valued in excess of $8.5 billion in 2015. For more information on the CORFAC network, call 224.257.4400 or visit www.corfac.com