Gaining an Edge: Make Your Commercial Property Stand Out

Commercial property competitive edge strategies

Scott Naasz

Founder and President Broker

North Star Commercial Real Estate Advisors

Keller Williams Preferred Realty

Gaining an Edge: How to Make Your Commercial Property Stand Out

In competitive commercial real estate markets, it’s essential to find ways to differentiate your property and give it a competitive advantage. Whether you own an office building, retail center, industrial facility, or multifamily complex, making your asset stand apart can attract higher-quality tenants, justify premium rental rates, and ultimately increase your returns. Here are some strategies to consider:

Focus on Amenities and Upgrades

Thoughtful amenities and strategic upgrades can make a major difference. For an office building, this may mean adding a tenant lounge, fitness center, or conference facilities. For multifamily, consider amenities like a pool, community room, or coworking spaces. Keep an eye on lifestyle trends and evolving tenant expectations.

Sustainability and Green Building

More tenants are prioritizing energy efficiency, sustainability, and healthy indoor environments. Upgrade lighting, HVAC, windows, etc. to be more efficient. Pursue green building certifications like LEED or ENERGY STAR. Promote wellness amenities like bike storage, enhanced air filtration, and green spaces.

Strategic Property Improvements

Simple yet thoughtful property enhancements can reposition an asset. Modernize lobbies, hallways, and common areas. Improve curb appeal through attractive landscaping. Reconfigure floor plans for more open areas and collaborative spaces.

Technology and Connectivity

Strong internet, cellular connectivity, and integrated tech amenities are essential for many tenants. Install fiber internet, in-building wireless systems, USB charging stations, keyless entry, etc. Smart building tech controls utility costs too.

Flexible Lease Terms

Offer tenants flexibility in lease lengths, expansion options, or rental structures like blend-and-extend deals. This appeals to growing tenants and those desiring flexibility.

Location-Based Advantages

Highlight the advantages of your specific location like proximity to major employers, retail, transit, etc. Promote neighborhood amenities and accessibility. Make navigation and parking easy.

Superior Service and Responsiveness

Establish a reputation for highly responsive property management and proactive maintenance to minimize vacancy periods and tenant turnover.

By being innovative and differentiating your property, you create a unique selling proposition to outshine comparable buildings. This adds value, improves marketability, and gives you a sustained competitive edge.

As cities look to revitalize older neighborhoods and industrial areas, thoughtful adaptive reuse allows new life to be breathed into vacant buildings. With creativity and careful planning, today’s developers can merge historic charm with modern functionality.

Looking to tackle an adaptive reuse project? The team at North Star Commercial Real Estate Advisors has extensive experience guiding clients through complex redevelopment projects. Contact us today to discuss how we can help bring your unique vision to life.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. It is always recommended to consult with a qualified financial advisor or investment professional before making any investment decisions.

Adaptive Reuse Projects: Breathing New Life Into Old Buildings

A renovated mixed-use development featuring historic brick buildings with modern additions, combining old and new architecture.

Scott Naasz

Founder and President Broker

North Star Commercial Real Estate Advisors

Keller Williams Preferred Realty

Adaptive Reuse Projects: Breathing New Life Into Old Buildings

In cities across the country, developers are finding creative ways to repurpose aging commercial properties instead of demolishing them. These “adaptive reuse” projects take old office buildings, factories, schools, and other structures and reimagine them for new purposes like housing, retail, or mixed-use spaces. While tackling an adaptive reuse project comes with unique challenges, the rewards can be plentiful for both developers and communities.

Innovative Adaptive Reuse Examples

Ponce City Market (Atlanta, GA) – This massive 2.1 million square foot mixed-use development converted the former Sears, Roebuck & Co. retail store and warehouse into loft office spaces, retail stores, restaurants, and residential flats. The project maintained many original details like the building’s exterior art deco design.

Krog Street Market (Atlanta, GA) – An abandoned 1920s warehouse along the BeltLine trail was transformed into a vibrant food hall and retail plaza with a landscaped pedestrian trail on the roof. Repurposing the historic building kicked off revitalization of the entire area.

Cornell Mills (Boston, MA) – This apartment and retail complex reimagined a 19th century textile mill into modern loft-style living spaces while preserving architectural artifacts like wooden beams, brick facades, and massive factory windows.

Challenges of Adaptive Reuse

While starting fresh with new construction allows a blank slate, retrofitting older structures for new uses requires careful planning and overcoming hurdles such as:

Aging infrastructure and materials like plumbing, electrical, HVAC systems
Code compliance with modern regulations for fire safety, accessibility, energy efficiency
Structural issues from years of deferred maintenance
Environmental issues like asbestos, lead paint, or contaminated soil
Preserving historic architectural elements to maintain character

Benefits of Building Reuse

Despite the added complexities, many developers are embracing adaptive reuse projects thanks to benefits like:

Reducing landfill waste from demolition
Repurposing embodied energy already used to construct the original building
Renovating is often more cost-effective than new construction
Preserving community heritage and character
Qualifying for tax credits for rehabilitating historic properties
Meeting urban infill and sustainability goals

As cities look to revitalize older neighborhoods and industrial areas, thoughtful adaptive reuse allows new life to be breathed into vacant buildings. With creativity and careful planning, today’s developers can merge historic charm with modern functionality.

Looking to tackle an adaptive reuse project? The team at North Star Commercial Real Estate Advisors has extensive experience guiding clients through complex redevelopment projects. Contact us today to discuss how we can help bring your unique vision to life.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. It is always recommended to consult with a qualified financial advisor or investment professional before making any investment decisions.

Tenant Attraction and Retention for Commercial Properties

Shaking hands and smiling in the lobby of a modern office building, representing satisfied commercial tenants.

Scott Naasz

Founder and President Broker

North Star Commercial Real Estate Advisors

Keller Williams Preferred Realty

Tenant Attraction and Retention for Commercial Properties

As a commercial property owner or manager, attracting and retaining quality tenants is crucial for maintaining high occupancy rates and a steady stream of revenue. In today’s competitive market, tenants have plenty of options, so it’s essential to offer a compelling package that meets their needs and exceeds their expectations. In this blog post, we’ll explore effective strategies for attracting and retaining top-notch tenants for your commercial properties.

Competitive Leasing Rates One of the primary factors that influence a tenant’s decision is the leasing rate. While you don’t want to undervalue your property, it’s essential to offer competitive rates that align with the market. Conduct thorough market research to understand the going rates for similar properties in your area, and price your units accordingly. Consider offering incentives, such as a rent-free period or tenant improvement allowances, to sweeten the deal.

Modern Amenities and Services Today’s tenants, whether businesses or individuals, are seeking more than just four walls and a roof. Offer a range of amenities and services that add value and convenience to their experience. Examples include on-site fitness centers, conference rooms, high-speed internet, secure parking, and even on-site dining or catering options. These amenities can be a significant draw for tenants and help justify higher leasing rates.

Tenant-Friendly Policies Flexibility and understanding are key to retaining tenants long-term. Consider implementing tenant-friendly policies that demonstrate your commitment to their success and well-being. This could include allowing for reasonable modifications or renovations to the leased space, offering short-term or month-to-month lease options, or providing resources and support for tenant businesses, such as networking events or marketing assistance.

Responsive Maintenance and Management Nothing frustrates tenants more than unaddressed maintenance issues or an unresponsive management team. Prioritize prompt and efficient maintenance services, addressing any concerns or repairs in a timely manner. Additionally, foster open communication channels with your tenants, encouraging them to report issues promptly and providing regular updates on any ongoing work or improvements.

Promote a Sense of Community Creating a sense of community within your commercial property can be a powerful retention tool. Organize tenant events, such as networking mixers, holiday parties, or charity drives, to foster a sense of belonging and camaraderie. Encourage tenants to collaborate and support one another’s businesses, fostering a mutually beneficial ecosystem within your property.

Sustainable and Energy-Efficient Practices In today’s environmentally conscious climate, many tenants are seeking eco-friendly and sustainable options. Implement energy-efficient practices, such as LED lighting, smart building systems, and recycling programs. These initiatives not only appeal to environmentally conscious tenants but can also result in cost savings that you can pass along in the form of competitive leasing rates.

By implementing these tenant attraction and retention strategies, you can position your commercial properties as desirable destinations for quality tenants. Remember, attracting tenants is just the first step – retaining them requires ongoing effort, responsiveness, and a commitment to fostering a positive tenant experience.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. It is always recommended to consult with a qualified financial advisor or investment professional before making any investment decisions.

Commercial Property Management Tips for Multi-Tenant Properties

Scott Naasz

Founder and President Broker

North Star Commercial Real Estate Advisors

Keller Williams Preferred Realty

Commercial Property Management Tips for Multi-Tenant Properties

If you’re responsible for managing a multi-tenant commercial property, you know it comes with unique challenges. Having multiple businesses under one roof requires strategic planning and careful oversight. From maintaining the property to addressing tenant needs and concerns, there’s a lot to keep track of. Here are some tips to help you effectively manage a multi-tenant commercial property:

Establish Clear Policies and Procedures

Create a comprehensive set of policies and procedures that outlines rules, regulations, and expectations for tenants. This should cover areas such as building access, parking, maintenance requests, noise levels, and shared space usage. Clearly communicate these policies to all tenants during onboarding and ensure they are readily available for reference.

Foster Open Communication

Maintain open lines of communication with your tenants. Schedule regular meetings or check-ins to address any issues or concerns they may have. Encourage tenants to report maintenance problems promptly and respond to their requests in a timely manner. Building a positive rapport with tenants can go a long way in creating a harmonious environmen

Implement Preventative Maintenance

Rather than waiting for problems to arise, implement a preventative maintenance program. Regular inspections and servicing of key building systems, such as HVAC, plumbing, and electrical, can help prevent costly breakdowns and disruptions to business operations. Keep detailed maintenance records and schedules for easy tracking.

Manage Common Areas Effectively

In a multi-tenant property, common areas like lobbies, hallways, and restrooms require extra attention. Develop a cleaning and maintenance schedule to ensure these areas are well-kept and presentable at all times. Consider implementing rules or guidelines for their usage, such as prohibiting storage or displays in hallways.

Prioritize Safety and Security

The safety and security of your tenants should be a top priority. Ensure that all fire safety systems are up-to-date and functional, and conduct regular fire drills. Install proper lighting, security cameras, and access control systems, and consider hiring security personnel if necessary.

Foster a Sense of Community

While tenants operate separate businesses, fostering a sense of community within the property can be beneficial. Consider hosting tenant appreciation events or creating a tenant newsletter to share updates and news. Encourage tenants to network and collaborate when appropriate.

Leverage Technology

Utilize property management software and online portals to streamline operations and communication. Tenants can submit maintenance requests, view building policies, and access important documents through a centralized platform. This can improve efficiency and tenant satisfaction.

Stay Up-to-Date with Regulations

Commercial properties are subject to various regulations and codes, ranging from zoning laws to accessibility requirements. Stay informed about changes in local and federal regulations to ensure your property remains compliant and avoid potential fines or legal issues.

Effective multi-tenant commercial property management requires a proactive approach, clear communication, and a commitment to meeting the needs of diverse tenants. By implementing these tips, you can create a well-maintained, secure, and harmonious environment that fosters business success for all your tenants.

If you need expert guidance in managing your multi-tenant commercial property, look no further than North Star Commercial Real Estate Advisors. Our experienced team specializes in comprehensive property management solutions tailored to your unique needs. Contact us today to learn how we can help optimize your property’s performance and maximize returns.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. It is always recommended to consult with a qualified financial advisor or investment professional before making any investment decisions.

The Advantages of Investing in Commercial Real Estate

Potential increase in gains investing in Commercial Real Estate

Scott Naasz

Founder and President Broker

North Star Commercial Real Estate Advisors

Keller Williams Preferred Realty

The Advantages of Investing in Commercial Real Estate

If you’re looking to invest in real estate, you’ll need to decide whether to put your money into residential or commercial properties. While both can be lucrative investment options, commercial real estate often provides some significant advantages over residential. Here are some of the key benefits of investing in commercial real estate:

Longer Lease Terms

One of the biggest draws of commercial properties is that they tend to come with much longer lease agreements than residential rentals. Residential leases are typically 12 months or less, while commercial leases can range from 3-10 years or even longer for some retail, office, and industrial spaces. Those extended terms provide far more consistency and predictability when it comes to your rental income stream.

Triple Net Leases

Many commercial leases are structured as “triple net” (NNN) agreements, where the tenant is responsible for paying a pro-rata share of the property’s operating expenses like real estate taxes, insurance, and maintenance costs. This can substantially reduce your costs as the landlord/investor and provide a more predictable operating expense structure. Residential properties do not usually have this favorable net lease structure.

Economies of Scale

If you invest in a multi-unit residential property like an apartment building, you’re still dealing with relatively small rental amounts and making lots of individual transactions with tenants. However, with a single commercial property that’s leased to one or a few tenants, you benefit from economies of scale by having much larger rental payment amounts that are more efficient to process and manage.

Simpler Tenant Management

Speaking of tenants, managing a commercial property with fewer tenants is typically far easier than overseeing dozens or hundreds of individual residential units. You’ll have less turnover and primarily deal with professional, established businesses as tenants rather than individuals and families.

Appreciation Potential

While both commercial and residential properties can appreciate nicely over time, commercial properties historically have experienced greater natural appreciation in value, especially for well-located assets in supply-constrained markets. This allows for bigger potential profits when you decide to sell or refinance the property in the future.

Tax Benefits

Commercial properties provide attractive tax advantages that residential rentals typically don’t. Owners can deduct things like mortgage interest, operating expenses, property taxes, insurance premiums, repairs, and depreciation from their annual taxable income. Those deductions can really add up, especially for larger commercial buildings.

Of course, commercial investing also comes with some additional complexity and risk compared to residential. But for investors that do their homework and invest wisely, the potential returns and advantages of commercial properties are extremely compelling compared to residential real estate.

If you’re interested in capitalizing on the lucrative opportunities in commercial real estate investing, contact the experts at North Star Commercial Real Estate Advisors. Our experienced team can guide you through every step of acquiring and managing high-potential commercial properties. Visit us at https://northstarcommercialre.com to learn more.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. It is always recommended to consult with a qualified financial advisor or investment professional before making any investment decisions.

Ideas to Increase Value of Your Commercial Properties

commercial properties including modern amenities, green building features, community spaces, and mixed-use development.

Scott Naasz

Founder and President Broker

North Star Commercial Real Estate Advisors

Keller Williams Preferred Realty

Ideas to Increase Value of Your Commercial Properties

As a commercial real estate investor or property owner, one of your primary goals is to maximize the value of your assets. While traditional approaches like renovations and lease-up strategies are important, thinking outside the box can lead to significant value creation. Here are some creative ways to add value to your commercial properties:

Reposition the Property Sometimes, the best way to unlock value is to reposition your property for a different use or tenant mix. For example, you could convert an outdated office building into trendy loft apartments or transform a retail space into a coworking hub. Identifying emerging market trends and adapting your property accordingly can make it more attractive to potential tenants or buyers.

Implement Green Initiatives Sustainability is an increasingly important factor for tenants and investors alike. Consider implementing eco-friendly features such as energy-efficient lighting, water conservation measures, and on-site renewable energy sources. Not only can these initiatives reduce operating costs, but they can also make your property more desirable and potentially command higher rents or sale prices.

Enhance the Tenant Experience Amenities and services that improve the tenant experience can significantly enhance the perceived value of your property. This could include adding a fitness center, installing electric vehicle charging stations, or providing on-site childcare facilities. Consider partnering with local businesses to offer discounts or exclusive perks to your tenants.

Explore Mixed-Use Opportunities Mixed-use developments that combine residential, commercial, and retail components are becoming increasingly popular. By incorporating multiple uses into your property, you can diversify your income streams, attract a wider range of tenants, and create a more vibrant and desirable community.

Leverage Technology Incorporating cutting-edge technology can streamline property operations, attract tech-savvy tenants, and increase efficiency. This could involve implementing smart building systems, offering high-speed internet connectivity, or integrating mobile apps for tenant communication and services.

Foster a Sense of Community Creating a sense of community within your commercial property can increase tenant satisfaction and retention. Consider organizing regular social events, establishing communal spaces, or partnering with local organizations to host community-focused initiatives.

Optimize Parking and Accessibility Convenient parking and easy accessibility can be significant value drivers, especially in urban areas. Explore opportunities to improve parking facilities, implement innovative parking solutions (such as automated systems or valet services), or enhance pedestrian and public transportation access to your property.

Explore Alternative Revenue Streams Look for opportunities to generate additional revenue streams from your property. This could include leasing rooftop space for telecommunications equipment, installing advertising displays, or offering rental services for shared meeting spaces or event venues.

By thinking creatively and exploring unconventional approaches, you can unlock hidden value in your commercial properties, differentiate your offerings, and stay ahead of the competition in an ever-evolving market.

Looking for expert guidance on innovative value-add strategies for your commercial real estate assets? North Star Commercial Real Estate Advisors specializes in helping clients identify and implement creative solutions to maximize property values. Our experienced team combines in-depth market knowledge with a forward-thinking approach to deliver tailored strategies that drive growth and profitability. Contact us today to learn how we can help you unlock the full potential of your commercial property portfolio.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. It is always recommended to consult with a qualified financial advisor or investment professional before making any investment decisions.

Mistakes to Avoid When Leasing Commercial Space

Scott Naasz

Founder and President Broker

North Star Commercial Real Estate Advisors

Keller Williams Preferred Realty

Mistakes to Avoid When Leasing Commercial Space

Leasing commercial real estate space for your business is a big decision that shouldn’t be taken lightly. Whether you’re renting an office, retail storefront, or industrial space, the terms of your lease agreement can significantly impact your company’s finances and operations for years to come. To protect your business, it’s crucial to understand the ins and outs of commercial leases and avoid common pitfalls. Here are some key mistakes to steer clear of:

Not Understanding Operating Expenses

Many commercial leases require tenants to pay operating expenses in addition to base rent. Operating expenses can include property taxes, insurance, utilities, maintenance, and other costs associated with the building’s operations. Carefully review what operating expenses you’ll be responsible for paying and get estimates on projected amounts. Overlooking or underestimating these additional expenses could strain your budget down the line.

Failing to Negotiate Renewal Options

Does your lease give you the option to renew when the term expires? And if so, are the rental rates locked in or subject to increases? Negotiate renewal terms that give your business flexibility and rent increase parameters you can plan for. Otherwise, you risk getting forced out or hit with unaffordable rent hikes.

Underestimating Future Space Needs

While you don’t want to overpay for more space than you currently need, it’s also important to consider your potential future growth. Many leases have inflexible expansion or contraction clauses. Thoroughly assess your company’s projected space requirements over the full lease term to avoid getting boxed in.

Overlooking Personal Guarantee Requirements

Landlords often require business owners to personally guarantee the lease obligations. This makes you individually liable if your company ever defaults on rent payments or causes other breaches of the lease agreement. Negotiating to have this clause removed or limited could protect your personal assets.

Rushing Into a Long-Term Commitment

The length of the lease term is critical. While longer leases can provide rent stability, they also lock you in and limit flexibility if circumstances change. On the flip side, shorter terms give you more agility but less negotiating leverage. Weigh the pros and cons to strike the right balance for your situation.

Not Having A Real Estate Attorney Review

Commercial leases are complex legal documents filled with provisions that substantially impact your rights and financial obligations. Avoid trying to navigate them solo. Always have an experienced real estate attorney carefully review the full lease before signing anything.

Leasing commercial space requires diligence and attention to detail. By being aware of these potential landmines and consulting qualified real estate and legal experts, you’ll be better positioned to negotiate favorable terms aligned with your business’s best interests.

Don’t go at it alone – the North Star Commercial Real Estate Advisors team has the years of experience guiding companies through the commercial leasing process. Contact us today for a complimentary consultation!

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. It is always recommended to consult with a qualified financial advisor or investment professional before making any investment decisions.

The Main Types of Commercial Real Estate Properties

Modern high-rise office tower in a downtown area

Scott Naasz

Founder and President Broker

North Star Commercial Real Estate Advisors

Keller Williams Preferred Realty

The Main Types of Commercial Real Estate Properties

Commercial real estate is property that is used solely for business purposes. It encompasses a wide range of different property types beyond just office buildings. As an investor or business owner, it’s important to understand the various classes of commercial real estate. Here are the main categories:

Office Buildings

One of the most common types of commercial properties, office buildings provide workspace for businesses. This can include high-rise office towers, low-rise office parks, and everything in between. Offices are typically leased out to tenants on a square-footage basis.

Retail Properties

Retail properties are commercial buildings that house stores, restaurants, entertainment venues and other businesses that provide consumer goods and services. Examples include shopping malls, strip malls, grocery stores, car dealerships, and freestanding retail buildings.

Industrial Properties

Industrial real estate includes properties like warehouses, distribution centers, manufacturing plants, storage facilities, data centers and flex spaces. These are typically large buildings designed for processing, production, assembly and logistics operations.

Multifamily Properties

Multifamily properties contain residential units within a single building or group of buildings – such as apartment complexes, high-rise condos and sometimes townhomes. While residential in nature, multifamily housing with over 4 units is considered a commercial real estate asset class.

Special Purpose Properties

There are also various special-purpose commercial properties like hotels, resorts, casinos, theaters, healthcare facilities like hospitals and medical offices, self-storage facilities, automotive properties like truck stops, data centers, and more. These unique properties often have very specialized design requirements.

Land

In addition to buildings themselves, undeveloped land that is zoned for commercial use is also considered a commercial real estate asset. Land can be acquired and developed into income-producing commercial properties.

Commercial real estate investors, developers, brokers and businesses need to evaluate the pros and cons of each property type based on factors like location, demand drivers, income potential and operational requirements. The right commercial real estate can be critical to business operations and investment returns.

If you are looking for commercial properties, contact the experts at North Star Commercial Real Estate Advisors. Their experienced brokers can help you find the perfect property for your business needs or investment goals. Visit our Contact Page to get started.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. It is always recommended to consult with a qualified financial advisor or investment professional before making any investment decisions.

A Beginner’s Guide to Commercial Real Estate

A compass and guide to Commercial Real Estate Investing

Scott Naasz

Founder and President Broker

North Star Commercial Real Estate Advisors

Keller Williams Preferred Realty

A Beginner's Guide to Commercial Real Estate

So you’re interested in investing in commercial real estate? Smart move – commercial real estate can provide stable cashflow and appreciation over time. However, it’s not as simple as investing in a residential property. Commercial real estate is complex, with many moving parts to understand. This beginner’s guide will provide an overview of the key things you need to know to get started.

First, let’s talk about the main commercial asset classes. The four primary types are:

Office – This includes office buildings and office parks leased to tenants. Key factors are location near transportation, amenities, and a strong employment base.

Retail – This includes shopping centers, malls, restaurants, and retail stores. Location on busy roads with traffic and population density is critical.

Industrial – This includes warehouses, distribution centers, manufacturing facilities, and flex space. Access to major highways, shipping infrastructure and labor is key.

Multifamily – Apartment complexes and other residential rental properties are a commercial asset class. Look for markets with strong demand and employment.

Each asset class has unique factors that drive performance. Do your research to understand fundamentals in your target market.

Next, let’s discuss financing. With commercial real estate, you’ll typically need a down payment of 20-25% as opposed to 3-5% for residential. Work with a lender experienced in commercial loans to explore options like commercial mortgages, construction loans, bridge loans, and commercial real estate backed loans. The right financing is essential.

Now, let’s talk due diligence. Do your homework before purchasing any property. Work with a qualified broker and attorney to review rents, occupancy rates, lease terms, zoning, taxes, environmental reports, and financials. For large deals, conduct a professional property condition assessment. The goal is to uncover all risks and opportunities.

There are many more factors we could discuss like market analysis, regulations, operations and choosing the right team. The key takeaway is that commercial real estate is complex but can provide excellent returns over the long term. Do your research, understand the asset class and market fundamentals, secure the right financing and surround yourself with an experienced team.

I hope this high-level overview gives you a good starting point for diving into the exciting world of commercial real estate investing. Let me know if you have any other questions!

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. It is always recommended to consult with a qualified financial advisor or investment professional before making any investment decisions.

Using Comps to Value Commercial Real Estate

A woman reading the comparable in commercial real estate deals.

Scott Naasz

President Broker

North Star Commercial Real Estate Advisors

Using Comps to Value Commercial Real Estate

When appraising commercial real estate, comps (or comparables) are one of the most important tools for determining a property’s value. Comps refer to recent sales of similar properties that can be compared to the subject property. By analyzing the key traits of the comps and comparing them to the subject, an appraiser can arrive at a well-supported opinion of value. Here are some tips for using comps effectively when valuing commercial real estate:

Find recent sales of similar properties. The best comps are those sold within the past 6-12 months and located in the same submarket as the subject property. The more similar the comps are to the subject in terms of size, age, condition, amenities, etc., the better.

Verify the accuracy of the comp data. Confirm the sale prices, dates, square footage, and property details by sourcing from multiple places like public records, MLS listings, and speaking directly with brokers involved. Inaccurate data will skew your analysis

Make necessary adjustments. No two properties are exactly alike, so adjust the comp sales prices for any material differences compared to the subject. For example, adjust for date of sale, location, size, condition, number of units, amenities, etc. Adjustments should be based on market evidence and trends.

Apply the comparable sales approach. With the adjusted sale prices, compare this data to the subject property and determine an appropriate value range. The indicated value of the subject will generally fall somewhere within the adjusted range of the comps.

Consider strengths and weaknesses of the comps. Some comps may be stronger indicators of value than others. Analyze the qualitative factors—does a comp have inferior access or deferred maintenance not present in the subject? Are adjustments reliable? Note how strengths/weaknesses impact the subject’s indicated value.

Determine a final opinion of value. Based on your analysis of the adjusted comp data, conclude an appropriate as-is market value for the subject property. Clearly explain how the comps support and lead to the final opinion of value.

Using comparable sales is typically the most straightforward way to develop a credible opinion on commercial real estate value. With high-quality comps and appropriate adjustments, an appraiser can produce a well-supported valuation. Comps should be used in conjunction with other valuation methods as part of a robust appraisal process.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. It is always recommended to consult with a qualified financial advisor or investment professional before making any investment decisions.

Contact Us Today

Scott Naasz: (612) 819-8285

Email: scottnaasz@kwcommercial.com

Kaitlyn Page: (701) 220-5123

Email: kaitlynpage@kw.com