In the residential realm, you often hear the terms, seller's market, or buyer's market. However, keep in mind, these terms apply to commercial real estate markets equally. While a buyer's market provides few hiccups and hurdles for buyers, in a seller's market, a commercial property buyer may face a challenge or two. Learn how you can navigate this potential challenge.
Compare the Investment to the End Game
It is not uncommon for the cost of properties to slightly increase when an active seller's market is in place. For this reason, it is incredibly important for you to compare the cost of the investment to your end-game goals. For example, if the property is more expensive, but also has more square footage than your current space, if the extra space will allow you to increase your revenue, then the deal may make more sense. Essentially, weigh the pros and cons.
Start With Your Last Offer
In a buyer's market, you can offer your lowest offer first, and then wait for the seller to counteroffer you, and go from there. However, in a seller's market, whatever you planned to offer as your final offer, you may want to present it as your first offer. It is very helpful to have a real estate professional involved in the transaction for this part of the process to help with presenting the best offer.
Be Prepared To Give the Seller Something
It is not always necessary, but you should at least consider the idea of giving the seller something. In terms of commercial real estate, this can include sharing the cost of the buildout. For example, if the total buildout is 25k, maybe you can agree to pay 10k of these costs. This small offering is a way to make your offer stand out from the competition.
Have Financing in Order
One of the most important things you can do is ensure your financing is in order. In commercial real estate, financing or cash is important, but when the market is trending toward a seller's advantage —it is critically important. When you present your offer, be prepared to also include your financing information. Again, a real estate professional can assist with preparing this data.
A real estate professional can be especially helpful if you plan to purchase a commercial property, so be sure to have a trusted professional on your side to navigate these challenges.Share