Whether you work in real estate, design buildings as an architect or engineer, or oversee the construction of commercial structures, having commercial building expertise is essential. Different types of commercial buildings have unique requirements, and specific laws apply to them.
If you’re interested in constructing a commercial building, there are four key considerations to remember.
Understanding Building Classifications
Building classes are vital in determining a property’s value in commercial real estate. These classifications reflect the quality and amenities of a building, as well as the rental income that can be expected to be generated by the space. Lenders, brokers, and investors use the building class rating system to communicate a property’s quality to one another quickly.
Class A buildings are the best in their markets and are considered the creme de la creme of office spaces. Class A offices in downtown business districts feature high-end finishes and technology, large floor sizes and aesthetically pleasing exteriors. These spaces are sought after by top tenants and can command premium rents.
Similarly, Class B buildings offer more functional and mainstream office space. These properties are in good condition but may be slightly dated or out of style. Typical features include tile floors, laminate counters, carpeted bedrooms, and an essential fitness centre. They also offer affordable rents and are an excellent choice for small businesses and middle-income earners.
In contrast, Class C buildings are more run-down and need substantial renovations to become marketable again. Often, these are older buildings located further from transportation and retail establishments. While they aren’t ideal, these properties can be a solid investment for risk-loving investors willing to pay a higher cap rate for the potential of a higher return.
The classification of a building is not only an important consideration for buyers and sellers, but it also reflects the overall cost of owning and operating space. For this reason, commercial buildings need to be classified correctly. Using this system can help you understand the value of a property, make better decisions, and determine how much you need to invest in your project.
The development of a commercial building expertise database relied on three main steps:
- I am gathering design or construction drawings for a collection of buildings.
- We are conducting material takeoffs to quantify the amount of each construction material in each building.
- We organise this information into a construction classification systems-based data structure (specifically UniFormat and MasterFormat).
This data was then analysed to identify the relative use of different materials in each building.
Buying a Commercial Building
Buying commercial property can be more complex than a single-family home. Additional factors, including the location and surrounding neighbourhood, can affect the property’s value. It’s also essential to have a clear vision of what the building will be used for so that you can make the best decision about whether or not it will meet your business needs.
Whether you’re in construction, are an architect or engineer or work in any other industry related to creating buildings, it’s critical to understand the differences between residential and commercial buildings. If you’re looking to buy retail space, working with an experienced real estate attorney who knows the ins and outs of commercial property can be helpful. They can help you narrow your selection and ensure that the property you’re buying is a good investment.
In addition, they can advise you on local zoning laws and other requirements that may impact your purchase. They can also assist with financing, including helping you secure commercial real estate loans with competitive terms. A commercial building expertise can help you navigate tax benefits and cash flow predictions.
The decision to rent or buy a commercial property depends on several factors, including the type of business you’re operating and your financial goals. In general, renting is less expensive and offers more flexibility than owning. However, there are times when it’s better to purchase a commercial property because of the potential return on investment.
Regardless of your decision, working with an experienced commercial real estate broker is essential to understand the process and avoid any mistakes. When you’re ready to begin evaluating properties, visit them before deciding. It’s also a good idea to bring a professional who can assess the building for potential issues. This will give you an advantage when negotiating the terms of the sale and closing on the property. During this time, it’s also common for the seller to ask for earnest money, a deposit showing you’re serious about completing the purchase.