by Prince Licaylicay | Sep 24, 2021 | All Articles, Buying, Investing
The real estate industry has long proven to be a bankable field for investors. It generates massive income and has produced billionaires like Sam Zell, Stephen Ross, and Donald Trump. The industry offers diverse investment options, including rental properties, real estate stocks, investment trusts, and crowdfunded deals.
Exploring CRE: A Lucrative Venture
Real estate is an exciting venture. If you’re looking to start investing, diversify your portfolio, or generate higher income, commercial real estate (CRE) is an excellent choice. It offers numerous opportunities to grow your wealth in ways that other forms of real estate might not.
What is Commercial Real Estate (CRE)?
Commercial real estate properties are those that generate income. These include business infrastructures such as stores, warehouses, restaurants, office buildings, hotels, entertainment spaces, and more. CRE investments carry a higher risk, but with higher risk comes higher reward. Although this may sound overwhelming at first, the potential returns make it worth considering.
Here are eight reasons why you should pursue investing in commercial real estate.
Bigger Profit
Let’s talk about the financial benefits. Commercial real estate properties typically sell or rent at much higher prices than residential properties. In fact, the commercial real estate industry in the U.S. generated $27 billion in annual revenue in 2020. According to the National Council of Real Estate Investment Fiduciaries (NCREIF), investors received a 12.7% profit share from this, which amounts to over $3 billion. This far exceeds the 8.8% annual return in residential real estate.
More Income Stability
In residential real estate, lease agreements typically last one year. While this benefits tenants, it can create high turnover rates for investors, meaning a constant need to find new tenants. However, CRE properties generally come with longer lease agreements, often three years or more. This ensures a more stable income flow and reduces the hassle of finding new tenants regularly.
Less Competition
There are fewer commercial real estate properties compared to residential ones. As a result, CRE properties are often in higher demand, making it easier to find tenants, especially for businesses looking to expand. On the other hand, residential real estate faces intense competition, which can lower profit margins.
Freedom to Choose Your Investment Scale
In CRE, you have the flexibility to invest in large-scale establishments like malls, hotels, or casinos, or you can choose smaller facilities. This allows you to start small and expand your investments as you gain more experience. Therefore, if you’re new to the industry, beginning with smaller properties is a good way to test the waters. Once you’re comfortable, you can diversify and increase your investments.
Property Maintenance Isn’t Always on You
Commercial properties are often leased by business owners, and they usually take care of maintenance themselves. In some cases, tenants may even improve the property, which increases its value over time. This reduces the investor’s overall cost while enhancing the property’s worth. Moreover, many CRE properties operate under triple net leases, meaning tenants handle expenses like utilities, insurance, and taxes, further reducing costs for the investor.
Professional Tenant-Renter Relationships
With business owners as tenants, the dynamic becomes more professional. Business owners maintain credibility and usually settle concerns in a professional manner. In contrast, residential tenants may have more demands and cause more stress over time.
More Time to Rest and Relax
One of the advantages of CRE properties is that they typically require less attention from you as the investor. Complaints and maintenance issues, if any, usually arise during regular business hours. This means fewer disruptions during your personal time. Additionally, less tenant attention means more time for you to relax, explore other investment opportunities, or spend time with your family.
CRE Can Generate Great Wealth
If you’re still uncertain about CRE’s ability to generate significant income, just remember that it has produced billions for investors globally. While the initial investment is higher compared to residential real estate, the potential payout is much larger. Therefore, before diving into CRE, it’s essential to seek advice from professionals, including commercial real estate brokers or real estate lawyers. This can help minimize risk and maximize your investment returns.
Even after outlining all the information above, deciding whether to go for a 1031 Exchange or a Cash Refinancing can still seem daunting. That’s why the LeveragedCRE Investment Team at Commercial Properties, Inc. is here to help you achieve your business and investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market!
Sources:
*https://www.firstresearch.com/Industry-Research/Commercial-Real-Estate-Management.html?fbclid=IwAR2mYwSyWc68eMoNpsXq1xZtSKTv528d2LNk0u1p9TJpGcYwvq7bxRwKwes
**https://www.fortunebuilders.com/commercial-vs-residential-real-estate/?fbclid=IwAR3WajMYzM1B0xCog6m1QwqTz7J-ppm1PrSy_lLWoD252mM456duho5S7WA
by Prince Licaylicay | Sep 17, 2021 | All Articles, Leasing
Leasing commercial property is a crucial step for any business owner. It requires careful consideration to ensure that you secure the best deal. Therefore, understanding the steps in leasing can serve as essential guidance for attracting both investors and tenants. Although the process can seem complex, the following eight steps will guide potential lessees through the critical stages of the lease process.
Step 1: Know and Determine Your Needs
Before anything else, it’s essential to define your specific needs and wants for the commercial property. By knowing these details, you can narrow your search and focus on spaces that will suit your business. Three primary factors will help you make informed decisions: location, rent budget, and the type of space required.
Location is key because it impacts the viability and value of your business space. You should consider customer access, competition in the area, and nearby businesses that could offer synergy.
Rent budget is another important factor. Monthly rent depends on several variables, such as the lease rate per square foot, utility costs, tenant improvements, and any annual rent increases outlined in the lease agreement.
Type of space is determined by the nature of your business. Commercial properties are typically categorized as industrial, office, or retail spaces. Therefore, it’s important to familiarize yourself with these types before starting your search.
Step 2: Run Your Numbers
Next, you should assess the costs associated with leasing a commercial property. This step requires you to calculate the overhead expenses and ensure that your business can handle the financial obligations. Moreover, it’s advisable to involve a broker who can provide detailed insights on leasing costs. Being realistic about your business’s financial health is crucial to avoiding costly mistakes.
Step 3: Tour Potential Sites
After setting your requirements, your broker will prequalify properties for you. They will gather as many options as possible to match your needs. Once you have the list, it’s time to tour the sites. Ideally, visit all of them on the same day to make accurate comparisons. While on-site, it’s important to remain reserved to maintain leverage during negotiations.
Step 4: Weigh Your Options
After touring the properties, it’s time to evaluate your options. Take into account several factors, such as the location’s accessibility, the surrounding competition, and the overall environment. Since you’re not choosing a home but a business space, these considerations will directly affect your success. While one property may perfectly meet your needs, it’s essential to consider the broader impact on your business.
Step 5: Create a Letter of Intent (LOI)
Once you’ve chosen the property that fits your criteria, your next step is to draft a Letter of Intent (LOI). Your commercial real estate broker can create this document on your behalf. The LOI is a formal statement indicating your interest in leasing the property, along with your proposed terms. Although the LOI is not legally binding, it sets the foundation for the lease negotiations that will follow.
Step 6: Begin Lease Negotiations
With the LOI submitted, it’s time to start negotiating the lease terms. Lease negotiations typically cover several key factors, including:
- Length of the lease
- Lease rates
- Concessions (e.g., discounts or incentives)
- Rent increases
- Renewal options
Depending on the complexity of the lease, negotiations can last anywhere from days to months. In addition, the property owner will want to verify your financial credibility, so be prepared to provide financial statements and other relevant documents.
Step 7: Identify the Target Date for Occupancy
Next, you need to establish a target date for occupying the space. This date might change depending on the extent of tenant improvements required. These improvements can range from simple tasks like painting to more complex renovations, such as building walls. Once the improvements are complete and the Certificate of Occupancy is issued, you can officially move in.
Step 8: Move In
After completing the lease agreement and any necessary build-outs, you’re ready to move into the space. However, keep in mind that your responsibilities don’t end there. It’s important to follow the terms of the lease throughout its duration. Failing to do so could result in eviction or penalties, so always stay compliant with the agreement.
By following these eight steps, you can navigate the complex process of leasing commercial real estate more efficiently. Using a broker, planning carefully, and staying informed will help you secure the best property for your business.
Even after outlining all the information above, deciding whether to go for a 1031 Exchange or a Cash Refinancing can still seem daunting. That’s why the LeveragedCRE Investment Team at Commercial Properties, Inc. is here to help you achieve your business and investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market!
by Prince Licaylicay | Sep 10, 2021 | All Articles, Investing
The COVID-19 pandemic has deeply affected many aspects of life, including the commercial real estate market. However, as seen throughout history—from the Black Plague to the discovery of penicillin—times of crisis often lead to expansion, innovation, and technological advancement. The post-pandemic recovery presents opportunities to focus on social justice, health, remote work, and economic improvements. Although the pandemic negatively impacted various commercial real estate sectors, it has also opened doors to new possibilities, such as lower rental prices and increased use of online communication for transactions. So, while the challenges are real, the future of commercial real estate isn’t entirely bleak.
Recovery and Commercial Trends in 2021 and Beyond
Commercial real estate will gradually recover from the pandemic’s effects, but it won’t be without setbacks. The following trends are expected to influence the market in 2021 and beyond:
- Asset Class Winners
Retail, hotel, and office spaces continue to lose value by 5% to 10%. However, industrial properties, data centers, life science facilities, and single-family homes are gaining in value. The lower transaction volume in favorable sectors may result in higher pricing due to increased competition among investors. - Low Interest Rates in 2021
The Federal Reserve is likely to maintain a monetary policy that keeps interest rates low throughout the year. This approach will benefit commercial real estate borrowers and positively impact economic recovery. - Population Decline in Major Cities
Cities like New York, Chicago, and San Francisco will likely experience further population declines. High living costs and the rise of remote work have pushed many people to seek more affordable locations with better lifestyles, such as Austin, TX, and Mount Pleasant, SC. - Rise of Alternative Assets
As investors seek resilience during an uneven recovery, commercial real estate exposure will increase. High equity valuations and negative yields from government bonds are expected to push more investors toward alternative assets like commercial real property. - New Opportunities for Office Spaces
Although remote work has led to a decline in the use of office spaces, new opportunities may arise. Companies are re-evaluating their office needs, and vacancies in high-traffic areas may attract businesses looking to expand. This period of experimentation could lead to creative uses for office spaces.
Silver Linings in Commercial Real Estate
Despite the challenges, the pandemic has presented a silver lining for the commercial real estate market. According to Lawrence Yun, chief economist of the National Association of REALTORS®, personal income is up 10.7% year over year, and personal savings have skyrocketed by 302%. As a result, consumers are expected to inject significant capital into the economy. People may be eager to spend their savings, especially on properties that have seen reduced value due to the pandemic.
Moreover, the interest rates for commercial real estate will be lower than in previous years, creating attractive opportunities for investors. The combination of lower property values and affordable borrowing costs makes this a prime time for people to invest in commercial real estate.
Opportunities in Office Vacancies and Digital Real Estate
Office vacancies present both a challenge and an opportunity. Many offices have remained empty or partially occupied due to remote work. However, companies are experimenting with how to organize their workspaces. As a result, the office sector could see a rebound as businesses find innovative ways to use commercial spaces.
Meanwhile, industrial warehouses and land continue to be bright spots for commercial real estate, with sales volumes increasing 2% and 3% year over year in the first quarter of 2021. Additionally, the digital real estate sector—which includes cell towers, data centers, and logistics facilities—has performed exceptionally well, offering another area of growth.
Conclusion: A Bright Future for Commercial Real Estate
In summary, the office sector still holds potential, especially with interest rates near zero, unemployment rates dropping, and vaccinations on the rise. Infrastructure investments may also contribute to the recovery of commercial real estate. Although the future depends on various factors, including those related to the virus, opportunities for commercial real estate investors are growing. Signs point to a possible rebound for the sector in 2021 and beyond.
Even after outlining all the information above, writing a letter of intent (LOI) can still seem daunting. That’s why the Leveraged CRE Team at Commercial Properties, Inc. is here to help locate commercial space for lease and assist in using a letter of intent to land such space. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market!
by Phill Tomlinson | Sep 6, 2021 | All Articles
Recent trends in the commercial real estate world might make leasing seem less attractive. Low-interest rates have made purchasing more affordable, and skyrocketing property values make ownership appear enticing for those seeking appreciation. Additionally, changes in lease accounting standards are removing some financial benefits of leasing. However, despite these factors, leasing space can still be the best option for many businesses. Let’s explore why leasing might be the right choice for you.
Leasing is Often Less Expensive Than Buying
The first reason to lease space is that it is usually less costly than buying. While leasing requires some upfront costs like deposits and tenant improvements, these are much lower than the down payment and reconfiguring costs involved in buying a building. Finding small, high-quality standalone space is also difficult, especially if your company needs a specific type of space, like a Class A high-rise or an industrial building with unique features.
Leasing Offers More Options
Leasing often gives businesses more space options, especially in central business districts, where most office spaces are available for lease. While suburban markets may have more properties for sale, they often consist of large, vacant campuses or small neighborhood offices that may not meet your company’s needs.
Leasing Provides Flexibility
Leasing offers more flexibility than ownership. You can quickly adjust to your business’s changing needs when your lease expires. Selling a building can be time-consuming and costly, especially if you’re not willing to lower the price. Leasing allows you to move and adapt your space as your business evolves.
Leasing Means Fewer Maintenance Responsibilities
Another advantage of leasing is the ability to leave building problems behind. If a space needs major improvements, you can move to a new location and let the new landlord handle the repairs as part of the move-in concession package. If you own the building, you’re responsible for fixing its problems, which can be a significant financial burden.
Leasing Helps Build Community
Leasing space in a shared building also provides community benefits. You can connect with other businesses in the same building, building relationships that can simplify vendor networks and even reduce employee turnover. These locational benefits are harder to achieve when you own your building and are more isolated.
Even after outlining all the information above, writing a letter of intent (LOI) can still seem daunting. That’s why the Leveraged CRE Team at Commercial Properties, Inc. is here to help locate commercial space for lease and assist in using a letter of intent to land such space. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market!
by Phill Tomlinson | Sep 6, 2021 | All Articles
Commercial leases are lengthy and can be daunting to read. However, it’s crucial to carefully review every part of the document before signing. While all parts of a commercial lease are important, certain areas require special attention. Let’s explore the key terms you should focus on when reviewing a standard commercial lease contract.
Length of the Lease
The lease term significantly impacts your business. A longer lease often secures a lower monthly rent since landlords prefer tenants who commit long-term. This reduces their need to renegotiate or fill vacant spaces frequently. However, if you expect your business needs to change soon, a shorter lease might be better. You don’t want to pay fees for unused space or face costly penalties for breaking the lease early. Including a sublease clause can provide flexibility in case your business changes before the lease ends. This allows you to rent out any unused space to another tenant.
Rent and Security Deposit Terms
Understanding how much you’ll pay is critical. Don’t just focus on the monthly rental rate. Be sure to review if and when rent increases, and by how much. Also, check for any additional fees, such as operating costs passed to you as the tenant. Find out what allowances, if any, are provided for improvements to the space. Additionally, pay attention to the security deposit. Sometimes, you can negotiate out of paying a deposit by providing a letter of credit from your bank.
Premises Terms
Many business owners overlook the terms of the premises in the lease. This section outlines exactly what space you’re renting. For instance, if you’re only leasing part of a building, ensure the contract includes access to shared areas like parking, storage rooms, lobbies, and conference rooms.
Use Terms
The use terms detail what you’re allowed to do in the space. This section may contain restrictions on the type of business you can run. For example, other tenants in the building may have clauses that prevent direct competitors from leasing nearby. This could limit your ability to expand into new business areas later. Furthermore, the use terms typically include rules for signage and advertising. Keep in mind that the first draft of a lease will likely favor the landlord. However, you don’t have to accept those terms as-is. Landlords expect negotiation, so don’t hesitate to request adjustments that benefit both parties.
Even after outlining all the information above, writing a letter of intent (LOI) can still seem daunting. That’s why the Leveraged CRE Team at Commercial Properties, Inc. is here to help locate commercial space for lease and assist in using a letter of intent to land such space. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market!
