Searching for any real estate space – whether it’s office space or commercial real estate – is a surprisingly complex and demanding task. While the rewards are huge for finding the right commercial buildings in the right community, there are many pitfalls along the way. And when you do find the right property for sale, it’s easy to rush into things (similar to how it’s easy to rush into a relationship after a really good first date).
But the best deals, like the best relationships, take time. By moving deliberately, planning for the future, carefully examining all of your options and acknowledging that none of the buildings for sale are perfect, you can find the right commercial real estate space for your business.
With that said, our Des Moines-area team put together our top things to consider when looking for commercial real estate. Whether you’re new to the real estate market or have some experience under your belt, these are good tips to consider before making any transaction.
Put location first.
It’s an old real estate cliché, but “location, location, location” really is the most important factor to consider when investing in commercial real estate—whether it’s a high rise downtown, a heavy manufacturing facility in an industrial area, or office buildings in the suburbs. Location shapes how both your customers and employees experience your business.
Here are a few questions you should always ask yourself when you’re considering a location:
How has the population changed over the last ten years? A growing population is often a sign of a healthy economy. For example, in Altoona, Iowa, the local population has nearly doubled over the last twenty years. Meanwhile, numerous new businesses across a variety of sectors have opened in the community.
Is it close to your employees? Depending on the needs of your workforce, you may want to choose a location that’s close to where they live. (The COVID-19 situation might influence your decision, as many employees who have worked remotely over the past year are now looking for work that’s closer to home.)
Does the area have a good transportation infrastructure? The proximity to a busy highway alone might be enough to sway your decision.
Is the community a business-friendly environment? Take a look at local tax rates and bond ratings. Also, we recommend talking to local business leaders; it’s always best to get testimony first-hand.
Are there nearby attractions? This is especially important for retail businesses that rely on reliable traffic. In Altoona, Iowa, for example, several major attractions (including an amusement park, a regional shopping center and a casino) bring in more than four million visitors every year. This kind of traffic makes it possible for a whole ecosystem of local businesses to thrive.
Hire a commercial real-estate broker at the beginning of your search.
It’s best to get good advice right from the beginning of your search. A good commercial real-estate broker will help you define your core goals, find available properties in communities that meet those goals and help you broker the best deal possible. By working with an expert at the beginning of your search, they will develop a richer understanding of your needs—and you can avoid making mistakes early in the process.
Bring in a contractor to assess the space.
Before you purchase any commercial real estate for sale in Iowa, you should bring in a professional contractor to assess the space. That way, you can have a clear understanding of any additional investments you may need to make following the purchase. (Back to the relationship metaphor, this is along the lines of introducing your friends to a new significant other. They can tell you if there are any red flags before you make things official!)
Run a stress test.
Let’s say you’ve found the perfect commercial real estate space. You invest, everything is going well—when suddenly the region’s economy crashes. Now, you’re under financial stress that you never anticipated, and you don’t have a plan to navigate your new circumstances!
You can avoid unpleasant surprises by running a ‘stress test’ on your property’s future. It’s pretty simple: Just make an analysis of the property under its current conditions—you should make this regardless—and then create adverse scenarios to see whether your business would be able to navigate them. Sure, you can afford the property now, but what if interest rates increase? What if local taxes go up? What if vacancy increases in the area and local traffic slows?
This may not sound like the most pleasant task, but you’ll be glad you did it. Even if a bad scenario seems unlikely, it’s always good to have a plan.
Read your lease carefully.
This may sound obvious, but you should read every word of your lease. Have your lawyer read it, as well. Far too often, businesses approach leases how most people approach iPhone user agreements—a quick scan (at most) and an immediate signing—when they deserve far more attention. Think of this document as one of the most important that you, as a business owner, will ever sign… because it is.
On that note, as you negotiate and review your lease, make sure you are familiar with the three types of commercial real-estate agreements.
Understand that no space is perfect.
Our final point also sounds fairly intuitive, but far too many great opportunities are passed up in the name of perfectionism (another example of real estate advice intersecting with relationship wisdom!). There are certain things that you shouldn’t compromise on—location is one—but you don’t want to miss out on a great piece of real estate because you’re searching for something perfect.
Stay focused on your core goals, the things that really matter to your business. Communicate those goals to your agent. And once you find a good property in a great location that meets your most important requirements, go for it!
Searching for commercial real estate in the Central Iowa region? Take a closer look at Altoona. Just east of Des Moines, Altoona is a growing community with a business-friendly environment, an outstanding infrastructure, a vibrant culture and a growing reputation as Iowa’s favorite entertainment destination. Search for available properties here!