Investing in office buildings is something many people don’t consider, when they make the decision to invest in commercial real estate. Often, they set their sites on multi-family dwellings or warehouse space. However, investing in office space can be a lucrative venture, as long as you know what to look for and what risks to avoid.
Look for the Three L’s
When browsing office spaces, you’ll likely be working with a professional, such as those found at sfofficespaces.com. If this is the case, the agent may be able to offer you additional pointers, but, as a starting point, you should consider the rule of the three L’s. These are location, looks, and light. These may be the biggest concerns in that you will want to select property that others will find appealing.
In looking at the location, it’s important to consider how accessible the office space is to parking and exits. This may be a larger concern, if there are other offices nearby. Also, look for amenities nearby, such as cafes, restaurants, and stores. Centrally located office space will be much more desirable.
How is the lighting? Businesses in search of an office will consider ample natural light a very attractive feature it will help cut down on energy usage and create a more uplifting atmosphere.
When judging the property’s looks, don’t just look at it from the future tenant’s perspective. Sure, you want it to be attractive, but you also have to bear in mind your own responsibilities. As the property owner, it will be your job to repair structural issues, mechanical breakdowns, and other problems related to the upkeep of the property. When shopping for an investment, consider how problematic the upkeep will be.
The Risks of Investing in Office Space
The biggest risk to investing in office space is that your property may end up vacant. That’s why investing in newly constructed real estate carries the biggest risk. While it also carries the potential for the largest gain, when rented out, an inability to attract tenants may be too great a risk for your first venture. The most promising situation is to invest in property that has been in use and has tenants already occupying the offices. This will make it easier on you to turn a profit early and prepare for the possibility of future vacancies.
It’s also important to be wary of schemes and to understand that residential homebuyers aren’t the only ones who can be victimized. One common scheme is for a developer to overcharge the investor, claiming that he or she will make up the difference through charging premium rental fees. Often, that money is lost. Even if the property doesn’t remain vacant, the property owner may not be able to make what the developer promised.
Another common scheme involves developers convincing investors to commit to a project too early in the construction phase. If the contractor can’t get the necessary permits, construction will be stalled, and the investor is stuck with the unfinished property. Conversely, the construction may be completed, but the investor can’t find tenants to occupy the property.
Certainly, investing in office space presents its own share of pitfalls, but rational thinking and a little research can help you avoid most of them. As long as you make wise decisions, commercial office space can present a lucrative opportunity.