Commercial Real Estate: Making The Sale
June 8, 2017 |
Ari Spiro, CEO and Founder
ORION Real Estate Investments
Real estate sales is one of the largest and oldest industries and professions in the world. The “tried and true” has been tested and retested – axioms and adages have been long-developed. Real estate is a business where the “what to dos” often morph into a self-audit of “what not to do.” This also holds true for the seminal event that defines our industry: the sale.
The fundamentals of commercial property sales are similar to selling a home: make it shine and sparkle. Clean, declutter and repair highly impact the success of a sale – just as it would with residential properties. In fact, this fundamental step may be more important with commercial transactions. A call or email with notice during normal work hours that a prospective buyer will be visiting the property does not happen in the commercial marketplace. There is no time to scramble with 10 minutes notice to straighten up – commercial properties must be show ready at all times.
Commercial properties are almost always accessible by the public; therefore, a prospective buyer may visit the property at any time. It is important to double down efforts on janitorial/porter services, keep up with sweeping the parking lot, power washing the sidewalks as well as keeping dumpster areas clean, clear and tidy.
When scrutinizing a multi-million dollar decision to purchase a retail center, office building, industrial property or an apartment complex, a potential buyer will make assessments about items such as parking, access, lighting, security, the impact of neighboring properties to the site, vehicular and pedestrian traffic in the area as well as the overall center itself. These assessments are analyzed at different times of the day on weekends and weekdays – making proper upkeep of a property or space a 24/7 priority. A potential buyer typically makes the determination that if the little things are not handled then the major, mechanical or structural items are probably neglected.
Walking into a home with overgrown landscaping that is filled with personal items and tchotchkes feels cramped, dark and generally claustrophobic – the same is true with commercial properties. It is essential that the landscaping is trimmed and well-maintained, especially the trees. A pleasant environment and positive first impression is easily made with a commercial property when there are big, beautiful trees to complement the building. If these trees are overgrown, that may be seen as problematic, especially where visibility to the property is concerned. Trees should be limbed up to improve street visibility. It is so important for the sale to improve the curb-appeal by creating more of a street presence. As a bonus, tenants will appreciate the improved visibility as well.
Prior to marketing a property for sale, it is crucial to make the minor repairs that are necessary and/or have been deferred. An Inspector that has been hired to provide a Property Condition Assessment will find the deficiencies in his/her review. More and more tenant leases are now triple net leases, whereby the tenant is billed for all the expenses in operating the property; noticeable repairs will be a negative to the sales process.
The financial condition of a commercial property is equally essential for a positive sale result. Books and records should be in order and any tenants that have fallen behind with the rent should be caught up. Prior to placing the property for sale, a meeting with the Property Manager and/or tenants is a prudent step to ensure tenant complaints are handled. Many tenants can be appeased with a little personal attention while others may need more attention – understanding the tenant disposition of the property is a proactive sales strategy. This allows a broker to identify tenants who are chronic complainers to the potential buyer prior to tenant interviews. There is nothing more uncomfortable than a potential buyer being surprised by an outraged and ranting tenant.
Commercial real estate is a business where common sense and good judgement is rewarded by a sale – it is that simple. A little bit of care and effort can go a long way.
As the saying goes, “Surprises Kill Deals.” The prepared commercial broker is the successful one.