Investing in a commercial property is a good option for real estate investors and business owners alike. But before making the decision whether to lease or purchase a space for your business, take a look at these advantages and disadvantages of owning a commercial space.
Advantages of Investing in Commercial Property
One of the first advantages you’ll notice about commercial real estate, compared to residential real estate, is that property values are higher (per square foot) compared to residential property – all else being equal. Higher property values can mean a higher sale price, should you decide to relocate your business or to simply liquidate the property to free up investment capital for a better opportunity.
Higher property values will also tend to translate into higher rents and income potential. So that is another benefit of higher property values.
Another advantage of buying a commercial space is that business tenants often take better care of the property than residential tenants. They are more likely to invest in keeping their space clean to project a professional, welcoming environment and create a better experience for their customers and staff.
Disadvantages of Investing in Commercial Property
A commercial space will tend to have a lot more foot traffic in and out of the building along with more vehicles moving through the parking lot. This creates a higher risk of accidents and injuries and therefore a higher level of liability for the property owner.
Another disadvantage is that commercial properties are mostly empty at night, making them a more likely target for vandalism and break-ins.
Commercial properties are also subject to more frequent visits from local government officials to inspect both the business operations and the property itself.
A restaurant, for example, could fail its annual health inspection, get shut down, and lose its income overnight. For the property owner, that’s a recurring risk to their cash flow.
Repairs and upgrades to the property will require inspections and compliance with government regulations. These will need to be performed by licensed professional contractors rather than the local handyman or DIY investor. While this is generally true for residential properties too, commercial properties are often scrutinized more closely and more frequently.
If you are considering investing in a commercial space, either as an income property or as a place to operate your own business, contact Star Capital USA to see what financing options might be available for you.