The term commercial property (also called commercial real estate , investment or income property) refers to buildings or land intended to generate profits, either from capital gain or rental income. Commercial properties include office buildings, industrial property, medical centers, hotels, malls, retail stores, farmland, multifamily housing buildings, warehouses, and garages. In many countries, residential properties containing more than a certain number of units qualify as commercial property for lending and tax purposes.
Video Commercial property
Commercial property type
Commercial real estate is generally divided into six categories:
- Office Buildings - This category includes single tenant properties, small professional office buildings, skyscrapers in the city center, and everything in between.
- Industry - These categories range from smaller properties, often called "Flex" or "R & D" properties, for larger office services or office warehouse properties for industrial properties " big box ". An important characteristic of industrial space is Clear Height. The apparent height is the true height, to the bottom of the steel girder on the inside of the building. It may be 14-16 feet for a smaller property, and 40 feet for a larger property. We also consider the type and number of docks owned by the property. This could be the Classroom Level, the parking lot and the warehouse floor are at the same level, up to a semi-dock at 24 inches, which is the height of a pickup truck or delivery truck, or a full dock at 48 inches which is a semi high truck. Some buildings may even spur railroads to load and unload.
- Retail/Restaurants - This category includes pad sites in front of highways, single tenant retail buildings, small neighborhood shopping centers, larger centers with grocery store tenants, "powerhouses" with storage stores great such as Best Buy, PetSmart, OfficeMax, and so on, even regional malls and outlets.
- Multifamily - This category includes apartment complexes or high-rise apartment buildings. In general, anything larger than fourplex is considered a commercial real estate.
- Land - This category includes investment properties in rural, undeveloped, rural land on the upcoming development track. Or, fill the land with urban areas, pad sites, and more.
- Miscellaneous - All of these categories include other nonresidential properties like hotels, hotels, medical, and self storage development, and more. [4]
Of these, only the first five are classified as commercial buildings. Residential property income may also indicate a multifamily apartment.
Maps Commercial property
Investment
The basic elements of investment are cash inflows, outflows, cash flow times, and risks. The ability to analyze these elements is key in providing services to investors in commercial real estate.
The cash inflows and outflows are money that is put into, or received from, the property including the original purchase cost and the sales revenue during the entire life of the investment. An example of this kind of investment is real estate funds.
Cash inflows include the following:
- Rent
- Recovery of operating costs
- Cost: Parking, vending, service, etc.
- Results of sales
- Tax Benefit
- Depreciation
- Tax credits (e.g., historical)
Cash outflows include:
- Initial investment (down payment)
- All operating and tax costs
- Debt service (mortgage payment)
- Tenant's capital and tenant rent costs
- The current Cost of Sales
The time of cash inflows and outflows is important to know in order to project the periods of positive and negative cash flows. Risks depend on market conditions, current tenants, and the possibility that they will renew their lease year after year. It is important to be able to predict the probability that the cash inflows and outflows will be in predicted quantities, what is the probability that their time will be as predicted, and what the probability is that there may be unexpected cash flows, and in what quantities they may occur.
The total value of commercial property in the United States is about $ 11 trillion in 2009, as measured by CoStar Group and published in the Journal of Real Estate Management . The relative strength of the market is measured by the US Commercial Real Estate Index comprising eight economic drivers and is calculated on a weekly basis,
According to Real Capital Analytics, a New York real estate research firm, more than $ 160 billion of commercial property in the United States is now in default, foreclosure, or bankruptcy. In Europe, about half of EUR960 billion of debt backed by European commercial real estate is forecast to require refinancing in the next three years, according to PropertyMall, UK-based commercial property news provider PropertyMall. In addition, economic conditions around future interest rate hikes; which can put new stress on valuations, complicate credit refinancing, and inhibit debt repayment can lead to a major dislocation in the commercial real estate market.
However, the contribution to the European economy in 2012 can be estimated around EUR285 billion according to EPRA and INREV, not to mention the social benefits of the efficient real estate sector. It is estimated that commercial property is responsible for securing about 4 million jobs across Europe.
Commercial property transaction processing (Transaction Management)
Typically, the broker will identify the property in accordance with a set of criteria established by acquisition, capital investment, or private equity firms. The company will conduct an informal assessment of the property's location and profitability potential, and if they are interested, they will signify their intention to move forward with a letter of intent (LOI).
An investment committee with senior acquisition executives reviews all pending transactions and suggests whether to move forward with a sale and purchase agreement, or PSA, and deposit. PSA is an exclusive agreement between a seller and a single interested buyer. No other LOI or PSA may exist for one property at a time.
After the PSA is run, the acquisition team typically has 30 days to complete due diligence, unless an extension is granted. During this 30 day period, the acquisition team investigates the property thoroughly in an effort to uncover unwanted characteristics, damages, or other circumstances that may affect the profitability or the final sale price of the property.
The acquisition team may want to investigate rent rolls, existing vendor contracts, city permits, insurance policies, etc. The acquisition company may hire a third party to make assessments, environmental reports, traffic counts, and more. The main purpose is to gather as much information as possible to make informed investment decisions.
Once the due diligence has been completed, the acquisition team must decide whether to proceed with the purchase to close. Closure is a 10-15 day window in which the acquisition company owes an additional deposit, and they must complete the financing.
When an agreement is closed, the post-closure process may commence, including notifying the lessee of the change of ownership, transferring vendor relationships, and submitting relevant information to the asset management team.
See also
- Class A office space
- Commercial buildings
- Exchange of Commercial Information
- International real estate
- Real estate
- Estoppel Certificate
Further reading
- Maliene, V., Deveikis, S., Kirsten, L. and Malys, N. (2010). "Commercial Property Assessment Convenience: Comparison of Case Studies in the UK and Lithuania". International Journal of Strategic Property Management . 14 (1): 35-48. doi: 10.3846/ijspm.2010.04. CS1 maint: Many names: list of authors (links)
References
External links
Source of the article : Wikipedia
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