Buying or Building a Commercial Property

There’s few things more exciting than a growing business.

But whether you’re starting a new venture or simply outgrowing your old space, you need to decide between buying or building a commercial property.

Both options have their merits and downsides, so it’s important to look at all of the factors at play. A wrong decision here could significantly affect your business’ profitability down the line.

Here’s a few things to consider when buying or building a commercial property.

 

1. Timing

The first thing to consider is when you need to move into your new building.

If you need to move your business right away, buying a commercial property is the best option. Building a property from the ground up takes a lot of time. You need to work with an architect to finalize the design and layout, get the proper permitting, and wait for the building to be completed before you can even start packing.

Buying a building is hardly instantaneous, but negotiating, getting an inspection, and signing the closing documents take a lot less time than breaking ground on a new location.

 

2. Price

Money is king when it comes to most transactions. But when it comes to buying or building a commercial property, there’s no certain winner.

Commercial real estate is a lot like anything else: you get what you pay for. But it’s also difficult to compare apples to oranges.

It’s important to know what your local real estate market looks like before you make the decision to buy or build. In a seller’s market, you may find that the market is saturated with fixer-uppers that need a lot of work. If your commercial inspection report is a laundry list of issues, you’ll need to factor in repair and maintenance costs in addition to the purchase price.

Similarly, buying land and building a commercial property comes with its own potential risks. Purchasing the wrong plot of land could make construction more difficult (and thus, more costly). To know whether it’s worth building, ask an experienced surveyor to give you the price estimates of developing the property.

 

3. Business Needs

Your business’ needs are likely the primary reason for buying or building a commercial property in the first place, so it’s definitely worth keeping them in consideration during every step of the process.

If your business has specific needs, finding an appropriate property that’s currently on the market and in your price range could be difficult.

For example, a manufacturing business probably wouldn’t require a location with a lot of foot traffic, but a restaurant or retail space would rely on it. Both of these businesses would also have very different zoning needs that would affect the “purchase vs. build” decision.

tiny house under construction sitting on top of blueprints

The main benefit to building your own commercial property is the ability to customize it to fit your needs, rather than having to work around an awkward layout or pay through the nose to get it to your standards.

Buying or building a commercial property is too expensive a process to end up with something that still needs to be renovated.

 

4. Professional Assistance

Buying or building a commercial property isn’t something you can do on your own. You’ll need a team of real estate and/or construction professionals to advise you from the very beginning.

And ultimately, your experience will only be as good as theirs.

Take some time at the beginning of the process to research the quality and credentials of the realtors, architects, surveyors, builders, inspectors, and any other professional you’ll be working with to build or buy your property.

What you find may even influence your decision. If you can’t find an architect worth hiring, you might want to stick with purchasing an existing building. If the pre-built storefronts you find all have code violations, you may want to build one from scratch.

 

5. Financing

Sometimes, the decision of whether to buy or build boils down to your financing options.

Your financial institution will have different options available for you depending on your unique situation.

work gloves next to stack of money

The terms of your loan will differ depending on how much of the building you’ll be occupying (as opposed to sub-leasing), how much equity you have, and how long you’ve been in business. There will also be differences between mortgages and construction loans that are worth looking into before making your decision.

Talk to your lender as soon as possible to find out what options are available to you. This will help narrow down your decision so you can start looking at properties or land.

 

Whether Buying or Building…Get an Inspection

Whether you’re buying or building a commercial property, everything ultimately rides on the inspection.

A commercial building inspector’s job is to examine a structure (whether it’s under construction or has been standing for decades) for defects and other issues that pose a threat. If you’re looking to move your business into a new location, it’s crucial that you protect your investment. A quality inspection from an experienced professional will do just that.

When buying an existing building, a code inspection would be able to tell you if the property has code violations that would be costly to fix. If you decide on new construction, a qualified building inspector can hold the builders accountable to make sure that your new location is move-in ready (remember, “new” doesn’t mean “move-in ready”).

There isn’t a “Lemon law” when it comes to real estate. A commercial building inspection can uncover issues before you’re stuck with the property.

No matter whether you’re buying or building a commercial property, an inspection from BIS can help save money down the road. Contact us today and request a commercial property inspection for your ongoing construction project or a property you intend to buy. Our credentials speak for themselves!