5 Major Factors That Determine The Price Of Your Commercial Property
In 2015, Commercial real estate development accounted for $450 billion of the nation’s Gross Domestic Product (GDP)
A recent study shows commercial real estate sales increased 8.4%, and prices rose 5.3% in 2016. This should be encouraging if you are considering selling your commercial property.
However, the study also indicates that the pricing gap between buyers and sellers is a major challenge.
So how do you bridge that gap? Market knowledge and in-depth research will help you determine a realistic price that is reflective of your property in total.
Here are 5 main pricing factors:
Location, Location, Location
This montra doesn’t apply to residential real estate only. Your commercial property’s location is a huge determining factor in price. Being in an area with other thriving businesses, major transportation hubs, highways, and potential customers increases property value.
Financial policies from economic development initiatives such as New Jersey's Urban Enterprise (UEZ) Program will also affect property value.
Physical Specs
The major physical attributes of your property impacting price are: square footage, the property’s actual – and effective – age, condition of the roof and foundation, and HVAC, electrical, plumbing, and HVAC systems.
Tenant Considerations
Current and potential rental income will have an effect on your asking price. Also, the quality of any existing tenants in terms of payment history, and possible liabilities on existing leases will need to be carefully considered.
Zoning Considerations
What use(s) your property is legally zoned for, and any possibilities or limitations regarding future use, will drive price.
Flexibility/Expandability
The more flexibility your building and property offers will help it adapt more readily to changing economic tides. The better it can accommodate fluctuating space and facility needs for both expansion and slowdowns, the higher it can be priced.
Hidden Figures
Certain running costs can sometimes be overlooked in the pricing phase. Buyers, however, will certainly consider costs for maintenance, management, insurance, taxes, security, energy, repairs, parking lot contracts and more when evaluating their risk-return tradeoff.
You’re Not In This Alone
A commercial real estate appraiser will help you uncover all of these factors, and any other piece of the puzzle you need to accurately determine a price that is fair and marketable to all.
Learn what credentials an MAI-designated appraiser possesses. Only those whose experience and credibility has been certified by the Appraisal Institute receives this certification.
Image: Flickr
