To buy or not to buy commercial space … that’s a question companies and CFOs wrestle with all the time.
Whether you’re looking to buy or rent space, keep this stat in mind:
About $1.4 trillion worth of commercial real estate loans expired at the end of 2014.
In roughly half of those cases, the borrower owes more than the property is worth, according to the Building Owners and Managers Association (BOMA).
Two keys to protect your firm
You may think, “Sounds like an opportunity for businesses like ours. There may be great deals to be had!”
Maybe so. But some property owners who get behind on or barely make loan payments may skimp in other areas … like maintenance!
Cutting back on cleaning, repairs, energy efficiency upgrades, you name it, can detract from the building’s value.
Your best bet:
• Hire an independent building inspector or get your companys’ facility manager to thoroughly check a property your company wants to buy or lease. Caveat: Some upgrades, like painting, are a no-brainer before a business moves in. But dented walls, worn-out carpeting, inefficient plumbing fixtures, etc., add a lot more in costs.
• Factor in the previous tenant’s financial picture. There could be problems with the building not easily seen in a casual walkthrough. Again a facility manager should be able to help you make the call here. If you contract out building services/janitorial, hire someone who’ll tell you what you need to know first.
