It is a big step to enter the market for a commercial property. However, if you are like most people at this point, you probably have had plenty of time to come to the decision. You may even have a specific piece of real estate in mind.
If this is your first commercial transaction, please note that commercial real estate is not like residential. There is more that can go sideways during transactions.
However, even before you sign on the dotted line, it can be more difficult to determine whether a commercial property is a good deal. Here are some of the things you should probably consider.
Land use and zoning
Modifications are available for land use and zoning — sometimes. Even if it could be possible to change these aspects of your property, you should consider whether pursuing variances would fit with your risk acceptance profile, timeline and budget.
If you are considering building a warehouse, you will probably want highway access. In fact, you should consider existing transportation infrastructure for any open land you buy — building roads to code is expensive in Arizona.
The legal right of the seller to sell might seem abstract. However, a clean title presents a strong value in the form of risk reduction. You generally would want to look for property without liens or holes in the title history. In fact, title issues you uncover during due diligence often explain why properties have below-market prices.
Buildings represent one of the biggest wildcards in commercial real estate. The popularity of strip malls is a testament to that: These are relatively predictable facilities that national enterprises can plan reasonably around. You probably want to get inspections and site-specific work estimates for all buildings to determine value — there are almost always surprises.
If you are from out of the region, then you might underestimate the value of water infrastructure. Phoenix, for example, is in the hot desert region of Arizona. It is important to consider whether your property — or your development budget — has what you need to meet your business goals.
Your business is unique. Therefore, some of these factors might way more heavily on your decision than others. There may even be unique attributes you require in a site that outweigh some of these common concerns. Nevertheless, the more information you have, the better decision you can make.