5 Questions to Ask Your Commercial Realtor®

When looking to buy commercial property, one of the first steps you can take is to hire a Commercial Realtor®.

1. How Long Have You Been a Commercial Realtor®?

Within any given city, there can be hundreds of new and experienced Realtors®. Commercial Realtor®s are different from residential ones; they are more business oriented than emotionally invested in families. They seek to help your business. Purchasing or renting a commercial property could take months. Finding an agent who has experience and knowledge about the industry is very important. 

An experienced commercial Realtor® will have extensive knowledge in the commercial sector that will help you find the space that your business needs to succeed. If the Realtor® is familiar with the region they may also have contacts and a business network that may strengthen your chances of finding the perfect space.

Another important question that fits nicely here; how long have you specialized in industrial, retail, or office property types? This is important because your Realtor® may be excellent at closing deals and ensuring everything is perfect on paper, but was it the absolute best location that they could find for your business needs?

commercial buildings

2. Which Cities do you Specialize in?

Hiring the biggest and fanciest Realtor® from the city may seem appealing, but do they know your small town well enough to really help you?

Having experience in the commercial real estate sector is great and is definitely a pro when it comes to closing a deal. However, those contacts that I mentioned above are equally important. If you are out of your geographical region of business you may not get the best “bang for your buck”. 

Perhaps seeking out a smaller, less experienced Realtor® who actually knows the market and is familiar with the region that you desire to rent or purchase in will be more beneficial to you and your business. More expensive doesn’t necessarily mean better… which doesn’t mean that the fancy Realtor® is worse, it means that they might not be the best fit for your specific needs.

3. How Long has this Property Been for Sale?

The length of time that a commercial property is listed is very different from residential properties. Residential properties listings close much quicker than commercial listings. Here’s why: 

  • It could take up to 3 months to get approval for a commercial property loan.
  • It depends on what price the property is listed at:
    • A property that’s listed well above the average market price may not sell for years.
    • Properties listed at the average price could sell within a couple months.
    • If the property is listed well below the average, there’s a good chance you’re getting less than it’s worth, but you will likely sell quickly. 
  • There isn’t really a specifically good time to sell commercial real estate in terms of seasonal preferences, but the economy and investment opportunities play a big role in the commercial market.
    • The effect COVID-19 pandemic had on the commercial real estate market is difficult to gauge because leases are considerably long-term (approximately 5 years).

This means that economic impact on the commercial real estate market must be analyzed at a long-term perspective. The effects of COVID-19 seem to only be making a nominal impact on the market. 

4. What are the Risks Involved with this Property?

When purchasing or leasing a commercial property there are always going to be an element of risk involved. 

  • Credit/Default risk: The inability to pay financial commitments.

A disturbance in the cash flow can harm the property owner and the tenant:

The property owner must pay back the lender that they used when buying the property. The money that the owner gives the lender comes from the rent payments from the tenant. If the owner doesn’t receive the rent money, they can’t pay back the lender. 

If the tenant can’t pay the rent, they may get evicted. A reason they may not be able to pay rent is diminishing sales. Which could lead to the tenant’s bankruptcy, and a loss of income for the owner until they can find another occupant. 

  • Purchasing real estate is an asset. A highly illiquid one.

If the owner must sell the asset quickly, it is unlikely that they will get a positive return on their investment. To sell it quickly the owner would need to list the property for a relatively low price.

Your Realtor® is there to help you in any way they can. Don’t be afraid to ask them to aid you in the risk assessment of the properties that you walkthrough and consider for your business.

5. Does this Property Match my Business Goals?

The most important part of finding a commercial property is ensuring that it checks off all of the important boxes that you have listed as “must haves”:

  • Does the space have the necessary square footage to meet the number of workers that have to be there.
  • If you’re in the business of retail, is it a good location for customers to find you? Can they park easily? Is your unit easily accessible?
  • What am I allowed to change about the rental unit? Can I make adjustments to suit my business’ needs?
  • Does this property allow future business growth? 

If the lease is 5 years, does the property allow for the goals that I have set for the next 5 years?

Need a Commercial Realtor®?

Phillip Moore is a Commercial and Industrial Realtor®. He has the experience to help you in the process of buying a commercial property. With years of experience in commercial real estate, he can give you advice on property searches, financing, and budgeting. Contact Phillip Moore today to see how he can help you find your next commercial space.