Commercial Property - A Perspective
From WikiProperty
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Land area
The bigger the better. Size does matter in commercial property. Some investors buy a building for its return or income but ignore the fact that it's sitting on only a small plot of land. Always remember what you're buying is the land, the building is only there for about 20 to 30 years, sometimes less. The size of the land (and what you can do with it) is critical. Buy the biggest piece of land you can get.
Siting (building position)
Where the building sits on the site will have an impact on future extension possibilities, development options and car parking. It's much better if the building is to one side of the section, or in a corner so you can expand or develop adjacent to the existing building.
Market rentals
You must know what the market rentals on commercial buildings are for the various classes in the areas you are considering. This is crucial simply because market rental for an office building may be $100 per square metre, so if you have 10,000 square metres, that's 10,000 multiplied by 100, which is your market rental per year. This is basic to your comparison of different buildings. Crucially, you need to know the market rentals so you can recognise a bargain when you see it.
Traffic flow patterns
Consider both foot and vehicle traffic. This is imperative for retail and determines your rental returns. It's a numbers game. For every 100 people who walk past a retailer's door, perhaps 50 will come in sooner or later, and 30 will buy something. Don't buy a retail investment in an area where nobody walks past. Generally, it's this simple: for retail, if people don't walk past then the business won't work. As a landlord, foot traffic determines the value of your property.
Good transport access
This is an indispensable requirement in every class. If a manufacturer can't get goods delivered to (or taken away from) an industrial building, then they won't lease it from you. A lot of deliveries are made by big truck and trailer units these days, not little vans. Truckies need to be able to get in and out without drama. An otherwise great building located down a narrow street is useless. It's also much better if trucks can drive around the building, or have a turning area in your yard, rather than being forced to drive in and back out of the same driveway.
Services
In modern buildings, services may include datacabling, plumbing, lifts and heating. Generally, air conditioning is a must in most office or retail buildings. If these services are not well set up, the installation (or retro-fitting) can be quite expensive. If you're talking to an accounting firm as potential tenants, the first thing they'll ask is "where can we put our phone system, jetstream, computer servers?. It's essential that your building can accommodate their needs. When you're looking at purchasing an old building make sure you are able to fit the new services without too much expense. If there's space between the ceiling and bottom of the next floor (or the roof), check whether you can get cabling, ducting and even air conditioning in.
Frontage, visibility, profile to the street
This is of great significance to your tenants. The bigger the frontage the better. Many older buildings are long and narrow at the front, and therefore invisible from a street frontage and promotional point of view. Tenants know the cheapest advertising is their street frontage and therefore want a profile. A building that people can drive past and see is worth more than a better building tucked away down an alley.
Car parking
A building with car parks will be far more attractive to tenants. If a company has 25 employees, you will be asked to supply five to 10 car parks. It's much harder to find tenants for buildings that don't have car parks. Your retail or office building must also be handy to public car parking. Shopping mall designers make sure that very few car parks are more than 50m away from the door. Experience has shown that people aren't willing to walk further than this.
Stud height
Stud height is the height of the walls or the ceiling height. As we have seen, in commercial investments the floor area is the basis of your rental amount (unlike residential rental properties where rent is basically so many dollars per bedroom). Particularly for industrial properties, rentals on commercial properties are calculated per square metre (or square foot). But both tenants and landlords these days understand that in many industrial buildings and warehouses people stack things up. If the ceiling is twice as high in one building as another, effectively you have double the storage space (cubic metres). Industrial tenants are aware of this and the market says the higher the better.
Clear span
Clear span means the building doesn't have any internal columns supporting the roof. It's cheaper to build a building with columns, because without columns in a large building the walls need to be thicker and the roof frame stronger. Generally, don't buy a building that has a lot of pillars in the middle. Go for clear span. Also, pillars generally mean lower ceilings, which means your industrial tenant won't be able to drive high fork hoists and store as much as in a higher stud building.
