How to Evaluate the Market Cycle When Shopping For Commercial Property

How to Evaluate the Market Cycle When Shopping For Commercial Property : The Commercial property market is changing and preparing for a new property cycle in most countries. Sure it has been a tough 2 years for all the property investors with the impact of the GFC, but the end is in sight. You just need to adjust your vision. What the GFC has done is create a pent up demand in many locations that will clearly show itself when businesses start spending and relocating. Many investors think that now is about the end of the property downturn, and the upturn will start very slowly and grow over the next couple of years.

Property investors in commercial real estate know that the real growth comes through holding property for a number of years. That is over 4 years. It is that cycle of property holding that will usually produce the best capital gains. You should not speculate in commercial property if your target is to hold property for less than 4 years, given that the risk is high for shorter term investment; try the stock market if you want to pick up (or loose) a 'quick buck'.

The liquidity factor in commercial property is high. That means that it takes longer to dispose of the property when the time comes for sale. Depending on the property in can take 6 months or more to sell a commercial property; in that case the sale strategy tapping into the right target market is critical. This is where a property agent with a depth of real skill and knowledge is essential.

Look for the signs if you want property opportunity. When business sentiment becomes consistently positive, then the property market will open up. Leasing will be the first sign that you see as businesses seek to relocate in better premises whilst the rents are lower. Sure the tenants will dictate the rent terms and conditions for the start of the lease, but it is the landlord that can dictate the rent reviews and the length of the term with options. If a landlord is holding a property for a number of years, it doesn't really matter what the lease start rent is (within reason), but it does matter where the rent will be in two years time. Plan rent reviews so that the future escalations that are possible are landlord biased.

So the message here is that if you are a property investor with money to spend, about now is a good time to start looking for properties to buy whilst the prices are still at the lower end of the scale. It is notable that many property investors are slow to make a decision at the moment and hence sales are more difficult to put together. The sales that are more common now are the sub $4m, where the sources of finance are less pressured.

Banks that are sitting on property funds will soon release the 'restraints' simply because of competitive pressure. They do not want to loose out on good commercial projects and finance deals. They may be selective on projects and buildings, and hence quality property is the order of the day when it comes to sales and leasing at the moment. Here are some rules of investment in commercial investment property.

* Know your market demographics and geography very well. This includes the way in which people and businesses occupy and use the region and for what reasons.

* Know the profile and sentiment of businesses in your area. Exactly what are the good points and places of the area? Why do people want to be there and will they be staying?

* Know the volume of space available for lease or purchase and also that which is already occupied.

* Know the rents and prices being asked versus those being achieved. This rent assessment includes net, gross, face and effective rents. The prices of premises are broken down to $m2 for each property type and location.

* Know the supply and demand for space in the precinct both now and predictably into the future. Keep a watch out for soon to be vacant space.

* Know the major property owners and businesses in the area and the relative decision makers for each.
* Know the businesses that are entering and leaving the precinct and the reasons why.
* Know construction methods and costs for typical buildings.
* Know the new areas of planning consideration and approvals.

So the above information is what we call market intelligence. This is a broad base of information that keeps you abreast of opportunity and change. It is surprising how many real estate agents and brokers do not do this well simply due to a lack of focus. The more effective you are at the process the more business you will find and generate for yourself.

John Highman is an expert in investment real estate strategy, property performance, and tenant mix analysis and strategy. He is an author and coach that helps property investors, and real estate agents improve their retail, industrial, and commercial real estate opportunities and targets.

John has specialised in major commercial, industrial, and retail property for over 30 years. He knows what works and what doesn't. He gives you the 'good oil' on getting active and achieving results. Articel From http://ezinearticles.com/?How-to-Evaluate-the-Market-Cycle-When-Shopping-For-Commercial-Property&id=5567334 For the latest updates PRESS CTR + D or visit Stock Market news Today

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