Myths are described as either traditional stories of phenomenon, or more commonly, a widely held but false belief or idea.
I’ve tackled commercial real estate myths before but I think it’s due time to add a few more to the list.
Myth #7 – My buddy paid (insert silly value) right down the street for the same thing.
Not all commercial real estate sites are created equal.
Zoning can vary even on the same block as your buddy's property. This will affect the allowable uses, which then affects the allowable tenants or buyers.
The more flexibility a site offers, the more attractive it can be.
Also, land relative to building structures plays a role in value. The percentage of land required versus the building is tied to use.
Land-shy properties become harder to accommodate business and therefore could be devalued.
There are many reasons why some sites might be worth more or less than their neighbours, so you can’t judge value by address alone.
Myth #8 – I’ve got plenty of time to get a lease in place.
Whatever time frame you’ve set aside for your search and lease negotiation, double it. Searching, viewing, securing and moving into a property can take a lot longer than you realize.
Decision-making timelines are well within your control, but be prepared to wait on the other side. Landlords are eager to lease vacancy, however they often have other businesses and believe it or not, they also have personal lives.
They can be unavailable to make snap decisions or be expedient in responding to offers.
The best way to bust this myth is to find out from the listing agent what kind of response time the landlord requires.
You may also need to engage third parties for part of the transaction and sometimes cannot speed up the wheels of bureaucracy.
Keeping on top of the professionals you’re using for reports or financing does often keep things rolling more smoothly than not.
Patience is a virtue, as they say.
Myth #9 – This building can be repurposed for the next person.
This myth comes with a caveat: while developers are mindful of building new structures that can be used for the most purposes, commercial assets can also have a shelf life.
It’s not uncommon that tenants, or owners, find themselves unable to utilize improvements made by previous tenants. So long as that can be torn out, though, the space can get a new lease on life.
Buildings that have been constructed with a specific use are the most obvious types in this category. A cost analysis could reveal that retrofitting a building might not be feasible.
The same can be said of older, functionally obsolete properties with dimensions that are simply no longer desirable to tenants.
Demolition and redevelopment of the site can be the logical step to recover the highest rents and most functional uses going forward.