When you work in commercial real estate agency sales and leasing, the inspection of commercial and retail property is a frequent event. In some cases you will be inspecting the property for a potential sale or leasing situation. In just a short period of time during the inspection you need to gather all the critical pieces of information that could impact the marketing, inspections, and subsequent negotiations for the property.
Here is an article from our Newsletter to help Commercial property agents and salespeople.
It should be said that the property owner may not necessarily be totally open and frank when it comes to the details of the property that you are inspecting. It may also be the case that the property owner will not understand certain elements of the property performance and legal title. For this reason, the number one priority of inspecting commercial and retail property centres around the requirements and your ability to take notes of all discussions with the property owner and your attention to detail in the gathering of property information.
Frequently you have to refer back to your notes as part of your negotiations with tenants or buyers as the case may be. Incorrect or missing information can get you into trouble as the real estate agent marketing the property and potentially bring on a legal action; take care with your efforts here.
Here are some ideas to help you with preparing for the commercial or retail property inspection process:
- Get a copy of the property title before visiting the property to know who the legal owners are. As part of that process you can also obtain a copy of the survey plan to delineate the boundaries. The survey plan will give you some understanding as to where you could find the survey pegs and when the last survey was undertaken. You will be looking for situations of property or boundary encroachment. If the property is part of a sale and purchase strategy, the boundaries will be an important factor of the property inspection. If the original survey is very old, it could be necessary to get a new survey undertaken based on the existing drawings. The boundary pegs can then be resited or relocated so that all potential purchasers understand where the boundaries are.
- Visit the local council or municipal authority to get details of the property zoning relative to the location. As part of that process, you can then understand if the property complies with the local property zoning.
- The local council or municipal authority should also be able to provide you with details of property approvals, notices, and orders. Some of these may have relevance to the potential marketing campaign to be undertaken.
- If the property is leased as an investment, get copies of the leases and licences relative to each tenancy. These documents will need to be reviewed to ensure that you completely understand the rental and cash flow coming from existing tenants. If any leases are soon to expire, that impact will need to be assessed as part of the pricing of the property or the marketing strategy. Vacancies may or may not be acceptable in the sale of the property; form your own opinion based on local enquiry and property availability.
- Look around the local property area to understand if the subject property is competing with any other properties nearby. The supply and demand for commercial premises will be part of that precinct assessment. You will have some impression as to the type of enquiry existing in the prevailing market conditions. Property buyers and tenants will be looking for properties in particular rental and price ranges. Your database will help you with the relevant facts and decisions here.
- The history of the subject property may be relevant as you take it to market. The history can sometimes provide challenges or opportunities that have impact on the marketing campaign. If the property has been occupied for a number of years by a particular business or tenant, then the local history will have some use in the marketing of the property and perhaps even feature as a point of difference or identity.
- Today the purchasers and occupants of commercial and retail property are very sensitive to matters relating to energy, the environment, and heritage. Your investigations and questions relating to the subject property should include these categories of property performance. When in doubt visit the local authorities to identify any and all orders and notices that may apply.
- The operational costs for the property are generally known as outgoings. When you take the property to the market for sale or for lease, the outgoings should be similar to or comparable to other properties of similar nature in the same location. Tenants and buyers will understand the acceptable levels of outgoings as part of the purchase or rental decisions that they make. Get a copy of the current outgoings budget for the property and if possible seek details of previous financial year’s performances.
- Investigate other recent sales and leases in the same location. They will have relevance to the pricing and leasing estimates that you put on the subject property. Inspecting commercial or retail property is a detailed process that needs care and attention to detail.
Over time you can create a checklist to help with the process of property inspection. The checklist will help you ask the right questions and drill down on matters of real importance.