Jan 02, 2019

6 Common Pitfalls to Avoid in Commercial Real Estate

By Don Catalano


8 Common Pitfalls to Avoid in Commercial Real Estate
When seeking a new office, there are many pitfalls to avoid. Before you sign the commercial real estate lease or purchase agreement, you have to ensure that you carry out an in-depth research and, perhaps, consult the advice of an experienced tenant rep broker. Here are a few things to avoid when leasing or purchasing your next commercial space.


1. Incorrectly Assessing Your Space Needs

When you go in search of a new office, don't neglect you future space needs. It is one thing to look for an office that fits the immediate space needs, it is another thing to plan for future enlargement. Having a larger-than-necessary office is better than running out of space. If your office is overcrowded, it will affect employee engagement and productivity. Therefore, it is important that you consider your future needs and make provisions for growth before entering a commercial lease agreement.


2. Buying a Property When Your Business is Still New

Even if you are running the next Facebook or Google, it is important that you keep cost minimal especially when the business is relatively new. One major mistake that business owners make is to buy a commercial property when they ought to be keeping operating cost low. Before you embark on buying a property, ensure that your business is already generating sufficient revenue to sustain itself.


3. Choosing the Wrong Location

Indeed, the factors to consider when deciding on the choice of location are quite subjective. Beyond the traffic patterns and the neighborhood demographics, there are more salient factors to consider.  Here are a few to consider:

  • Proximity to where your employees live

  • Amenities in the building and also what is nearby
  • Expansion space availability
  • Safety and security of the location


Many businesses have failed because they are located in the wrong place.


4. Limiting Your Search to Public Listings

There are hundreds of amazing properties that are not publicly available on listing websites. If you focus solely on public listings, you may be missing out on a lot of amazing property opportunities that may suit your business well. This is why it is advisable that you work with a tenant rep broker who knows the industry well. They will be able to show you many other commercial properties that are not publicly listed.


5. Making an Emotional Purchase 

For important buying and leasing decisions like commercial real estate, it is essential that you avoid letting your emotions influence your buying decisions. Your purchase has to be strategic by considering location, historical performance and property’s size.


6. Overlooking Ongoing and Upfront Costs

It is important that you factor all the running and future costs into your buying decision. Failure to pay attention to the upfront and ongoing costs could negatively affect your business’ accounting books.


Here are a few other articles we think you might enjoy:

The Best Office Space Deal -- In Three Steps

You Need a Tenant Representative Broker: Here's Why

Beyond Rent: What You Need to Know About Occupancy Cost


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Don Catalano

Don Catalano