Factors Affecting the Value of a Commercial Real Estate Property

The commercial real estate market is constantly fluctuating.  Because of this, ensuring that you get the best deal requires a fundamental understanding of the key factors that may contribute to the fluctuation at any given time.  This familiarity is equally as important for those looking to purchase or invest in commercial real estate as it is for those looking to sell or lease their properties.  Whether you are seeking medical office space, a warehouse, or another type of commercial property, getting to know the ins and outs of your particular market is crucial if you want to make sure that you are getting the most bang for your buck.

Location

Factors Affecting the Value of a Commercial Real Estate Property The commercial real estate market is constantly fluctuating. 

It’s been said time and time again that location is everything and this holds true even with commercial real estate.  Different locations will pose greater desirability within the market at different times.  You will need to consider the location’s accessibility when it comes not only to the target market, but also to potential employees.  You will also need to ensure that the desired space is zoned for your type of business.

Demographics

Demographics and location go hand in hand when it comes to the value of your commercial real estate property, namely for the reasons listed above.  Taking into account statistics such as age, race, gender, average income level, and projected growth of an area and its population will help to determine what types of properties are in demand, therefore directly correlating to how they will be priced.

Economy

The demand for any particular commercial real estate property will be directly related to the state of the current economy.  Depending on where consumers are spending the bulk of their money, a higher demand will be created for the types of properties where those products or services are being offered, therefore driving up the price.

Motivation of Owner

A property owner doesn’t make any money off of their commercial real estate investment if the space remains empty.  That being said, most owners are driven to sign a reasonable lease within a relatively short amount of time, giving the lessee much more wiggle room to negotiate the best deal.  For those selling property, however, the urgency may not be as great, particularly if they already have existing tenants occupying the space.  This gives the seller much more leverage to stand firm in their asking price, especially in an open and competitive market.

Comparable Properties

A great way to determine the value of a commercial real estate property in a given area at any given time is to check out some of the comparable properties that have recently sold or been put on the market in the area.  A comparable property is defined as a space used for the same purpose which is of similar square footage, offers similar amenities, and is within a reasonable distance from the property in question.

Physical Condition

The physical condition of a commercial real estate property is going to be another key factor that will influence its sale or lease price.  Properties within newer buildings obviously stand to incur less potential costs by way of repairs and upgrades to new owners and tenants down the line, thereby greatly increasing their appeal within the market.  Contrarily, older buildings are likely subject to the necessity of repairs, some of which may be extremely costly, thus driving down desirability.  Things that may be taken into consideration here are the current condition of the roof, the HVAC system, the age of the pipes and electrical wiring, the durability of windows and doors, and the stability of the building’s foundation.  Depending on the type of property, this may also be affected by aesthetic upgrades such as wood flooring in office spaces, stainless steel appliances in multifamily units, or pristine landscaping on the exterior of the building.

Looking for Commercial Real Estate in the Hattiesburg Area?

The most foolproof way to ensure that you are getting the best deal on your commercial real estate property, whether this be determining a selling price, negotiating a lease, or making sure you don’t pay too much on an investment, will always be working with a skilled Commercial Real Estate Advisor who can help you navigate the market.  At SVN | Southgate Realty, LLC, we’ve been making a mark on the commercial real estate industry since 1980.  That means the ability to offer our clients 38 years of tried-and-true experience, pairing them with the perfect properties and guaranteeing them the best deals on the market.  Learn more about our company and take a look through our database of available properties today, and then reach out to get your search underway.  We’re excited to add you to our list of satisfied clients!