Five Critical Factors to Consider Before Developing a Commercial Real Estate Property

January 28, 2021

Investing your hard-earned money in real estate has always been a popular way for people to secure their investments in the long-run. Such investments almost always result in higher returns and keep your finances growing the way you want them to.

That's precisely why developing a real estate commercial property is an excellent idea. In the Americas, real estate sales amount to $511.6 billion, with the Asia Pacific region leading sales at $847 billion, showing there's potential everywhere.

However, just because it's a good idea doesn't mean it's easy. It would be best if you considered a variety of factors before committing as big as this.

Several uncontrollable factors will affect your project, from the latest market trends in real estate to the fluctuating economy. However, there are a few things that are in your control that you must pay attention to. Here are five things to consider before building a commercial real estate property:

Manage Your Budget And Financing

It's no secret that constructing a commercial property won't come cheap. Apart from this, you also need to ensure that every penny spent yields a profit. It would help if you got in touch with a financial consultant who can guide you on your financing options and how much investment would be required for starters. You should ideally create a process that optimizes the performance and cost of your commercial project.

Additionally, if you're falling short on financing, you can opt for mezzanine debt that can provide you with quick cash for your real estate project without refinancing your mortgage. It grants you immediate liquidity, maintains your interest rate, and helps you avoid prepayment penalties.

You should make a detailed list of your expenses, such as equipment rentals, as well as cover major expenses like wages. You should maintain an extra 10% of your planned budget in case of any unforeseen issues.

Evaluate The Location And Building Type

One of the first things you need to figure out is the type of commercial building you want to build. Every building type has its own standard and needs. You can consider multiple options, such as residential, hotel, industrial, and retail properties. You can also look into offices and gyms.

Once you've figured out the building type, you need to look into potential locations. This location needs to be zoned for commercial development and allow easy traffic access. It would help if you explored other businesses in the area that might attract your target audience and be potential competitors.

Additionally, it would help if you found out whether these locations have any infrastructural or developmental plans that could potentially impact your commercial investment either positively or negatively. Researching into these areas prior to making any commitments is crucial.

Zoning, Permitting, And Planning

Every commercial property is bound by its own necessities. You need to figure out how visitors and customers will use your property. It would be best if you determined how you can accommodate customers, employees, and every other need that may arise.

It would be best if you looked into modern amenities and technology that can improve your building's value. There are numerous commercial building amenities you can look into to help give you ideas on what will provide you with an edge in the market.

For instance, you need amenities for residential buildings, such as in-wall USB ports, bike-sharing, high-speed wireless internet, pet spaces, child care, laundry, and dry cleaning services, a wellness center, and a massage room.

Whatever you decide to build, you need to ensure you're following permits and zoning laws, especially before constructing the property. Some areas may have restrictions on color, floors, and heights that will dictate how flexible you can be with the design.

You should reach out to a construction management company that can help you plan your property, such as reaching out to the local zoning office and ensuring your real estate projects meet any regulatory requirements.

Select A Contractor And Architect

An important aspect you need to consider is how much time you can allocate to your real estate project. You can potentially lose customers during the building phase because you're more focused on the end-goal than making progress regularly.

In this case, you can hire a construction management team that'll help you stay on track. While this is an extra cost, it'll end up saving you money in the long-run since an experienced team can help you efficiently utilize your space and resources.

Know Your Team Inside-out

While communicating with any professional, you should convey your requirements, as well as your limitations in terms of budget, timelines, and regulations. It would be best to build a repertoire with designers, project managers, and architects who can help bring your vision to life.

It would help if you remember that you'd be collaborating with these people soon, potentially even for years to come, so it's vital to build a healthy working relationship. Establish excellent communication to ensure these professionals know what you're looking for and deliver the project according to your expectations.

Final Thoughts

Developing a commercial real estate project isn't an easy feat; you need to consider various factors to execute it successfully. You need to research extensively and ensure you're ready to take on every challenge that comes your way.

Every step is crucial, and by considering the factors listed above, you can ensure you're getting your real estate project off on the right foot. Every factor is vital, so make sure you're not ignoring anything.

Carlos Diaz
I believe in making the impossible possible because there’s no fun in giving up. Travel, design, fashion and current trends in the field of industrial construction are topics that I enjoy writing about.

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