What to Do If You Are Asked to Price a Commercial Property for Sale

In commercial real estate you are asked to price a property for sale almost every day. Price analysis and setting is different than valuation and is done for a different reason.

Pricing a property is usually done as part of taking the property to the market for sale. In this market the pricing of a property is quite hard given that the property market and the economy is changing week by week in some locations. The prices that properties sold at 2 or 3 years ago are not the prices of today; things have changed and property owners need to accept that. Prices have fallen across the board in most types of commercial, industrial, and retail property.

If you cannot price a property then it pays to let the market decide what the price should be. You can do that by using the following methods of sale:

  • Auction
  • Tender
  • Expressions of Interest

These methods of sale will let the market set the level of enquiry and the price. When you really do not have any idea about today’s property prices for a particular property then one of the 3 methods of sale is the best way to go.

If on the other hand you are to price a property today there are a number of factors that should really be considered in the process. Here are some of the main ones:

  1. Levels of enquiry currently for that type of property
  2. Quality of property improvements and age
  3. Upkeep of the property and structural integrity
  4. Environmental and heritage matters that can impact property upgrades or operation
  5. Tenant volatility or stability. Add to that the elements of anchor tenant occupancy.
  6. Current property usage and opportunity to change or redevelop
  7. Tenant mix and length of leases and how they impact the sale
  8. Existing lease incentives that are not discharged and that may impact the property cash flow at sale time
  9. Current building outgoings and relevance to the expenditure budget
  10. Vacancy factors in the property and the region
  11. Supply and demand for space in the area and for that property type
  12. Income performance from the property now and in the future, including rent review profiles and lease options expected
  13. Levels of current passing rent from the tenancies and if they are in line with market rent
  14. Comparable properties in the area
  15. History of the sales and rentals in the area
  16. History of the property and the ownership
  17. Zoning for the property and the current building codes that apply to the property usage

All of these things can impact the price that a property will achieve in the current market. It is easy to see why pricing a property today is a difficult task. Total property research is part of the price estimation process.

Lucrative Commercial Property for Sale, Say Foreign Investors

According to some research sources, commercial property prices are continuing to rise, while others insist the market is slowing. Either way, now could be an ideal time to consider if your current business premises is going to be sufficient for your needs over the next two or three years. The economy has meant some businesses might have been unable or unwilling to commit to moving to a larger or more appropriate building.

After all, it’s better to keep a job in an outdated building than to have no job at all. However, there are signs of national economic recovery and many companies are wondering if now is a good time to buy a new workplace, or even consider becoming a landlord. Foreign investors into British commercial property for sale have had this idea for some time now, taking advantage of low prices and helping bump values and stir up investment, especially in the City of London.

Some companies might also be motivated to buy their own property because of the resultant rising rents, and not just in the capital but outside London and beyond the M25. As the economy recovers there will be plenty of opportunity for people with their pulse on the property market to make the most of the upturn. A snapshot of values across the country shows a predictable variation of the price of commercial property for sale.

Some canny company business owners also trawl residential building specifications for suitable premises for their operations – though change of use permission can make the buying process slightly more lengthy and complicated.

Official house price figures for July fell, according to the Royal Institution of Chartered Surveyors (RICS), whose surveyors recorded a glut of properties being put up for sale, which could account for the overall price drop. “The fall in the RICS house price measure is broadly consistent with most other recent data that has been released,” said Ian Perry, RICS spokesman “Significantly, the forward looking price expectations numbers suggest that this softer trend will continue through the second half of the year. However, agents are still generally optimistic about sales activity which should benefit from more realistic pricing of properties.”

This means, presently, it could be a buyer’s market and whether you are looking for commercial or residential properties, it’s wise to keep a close eye on what’s occurring. More good news for business owners and their properties is that the government is considering changes to Discretionary Business Rate Discounts to make them fairer.

All around your local area you will find that there are many properties available to rent or to buy. Many people decide to look for a rent property because they like the option of not having a mortgage to pay. They like the freedom of paying a service or property manager in order to keep a roof over their head. Some like the option that on the hot days of summer they do not have to get out there and mow their grass or find someone to plow the street when the snow comes. They can just stay inside their apartments or townhomes and have the property own take care of it. Naturally not every rental property is like that.

This is just one side of the rental/owner equation. Some people are out there trying to find a property to take over and begin to manage. There are many who seek the challenging and rewarding career or property management. Most people see that potential money maker that owning a property can be but they do not quite see all that is involved in managing the property. Owning the property is good enough for some people and deciding pay someone to manage the facility is what some people do who do not want to get involved in the everyday work.

There is not a particular method that people follow in order to try to manage their properties. What they will attempt to do is to find a property for sale and see what they need to do to either get the property back on track or begin the initial management process. There will be property managers who like to observe from the outside and then get with the current owner to see what condition the property is currently in. This is absolutely necessary before a person looks to purchase a property. Depending on the person and the business, they might want to look at getting a residential property or a commercial property for their managing.

With the current economy, some people are trying to ride out the wave of unemployment which in turn is hurting the purchasing power of some businesses and individuals. In the past you would see that people would buy house, fix and change some of the interior, exterior and then attempt to see it for profit. Well now they are not as sure if their residential home they are flipping will sell. If it does not sell, then they are stuck with the mortgage of the house. For many this has been a lucrative business and now with the unsafe economy some people have to find other methods of income. There are still many people who have not given up on the possibility of being a property buyer and owner again, they are just waiting for the market to even out.

On the flip side, those people who have some extra equity or extra money saved away in a safe place can really make a name for their selves in the business world. What they can do is see that there are some commercial properties for sale that are available for purchase. Businesses will access each property to see which the best one for their business venture is. Depending on the location and the city, some business could really clean up and take over some very big properties and restore them to a profitable state.