How to Negotiate When Buying Commercial Real Estate Property


Purchasing commercial real estate can be both the most significant and riskiest transaction that your business ever makes. Many entrepreneurs make mistakes that affect their investment and causes them to have unexpected expenses. It’s imperative that you take the time to thoroughly prepare for your negotiations when purchasing commercial real estate.

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Here are some of the best ways to help with your negotiations.

Consider Your Needs

As a starting point, you need to thoroughly evaluate your business’ needs and how the property might meet them.

  • Location: Your location needs to suit your business’ needs. Make a list of what you need to help you along the way. Whether it’s parking and public transit, secure client and employee accessibility, or shipping and receiving needs—your location has to cater to them.
  • Space: Thinking about space is critical. You can end up costing your business more than necessary by purchasing a site that has more space than you need. Analyze the area that you currently have, and then anticipate growth.

Setting Your Budget

Having an adequate budget from the get-go can give you more negotiating power with the property’s vendor, because you’re clear on what you can afford. You can speak with your accountant and financial partners to help you determine a decent budget and even get pre-approved for financing.

If you are looking for financing, ensure that you explore all options. You need to remember that your funding has to cover other costs such as renovations, land tax, realty commissions, and more. Also, consult with your bank to find out what documents they require and what conditions you have to meet.

Good Advisors

Look for a commercial real estate agent who understands all of your concerns and is familiar with the local market—including unlisted properties. Having an agent can be crucial in the negotiation process. It’s best to ask your agent to research the market to find you the best property that meets your desired location and space requirements, as well as your budget.

Additionally, having a reliable lawyer on your side can also aid with negotiations. Hiring a commercial lawyer that is familiar with the business is worth the extra cost.

Lowering Costs

Today’s real estate market is high-flying, so it’s crucial to find ways to negotiate a lower price. Here are some tips:

  • Remote sites can offer cheaper real estate
  • Locations designed for former special-use such as restaurant chains or banks can be more affordable. Their specific design makes them harder to sell.
  • Have your realtor look into repossessed locations or those in distress.
  • Approach building owners that have unlisted properties—you can save a lot of money without paying a realtor commission.
  • Don’t eliminate locations with more space than you need. You can potentially lease out the additional space to other tenants.

Closing the Deal

Before you close the deal, you need to investigate the location thoroughly. It’s suggested that you have you have your own evaluation done, and find out all the information that you can. Make sure that the vendor informs you of the building’s age, any renovations that were done, any damage that the location has endured, etc.

Once you are familiar with your chosen location, have assessed the property, and have agreed on a purchasing price, you can close the deal. Prior to closing, make sure that you have property tax statements, utility bills, and any other financial documents that go back five years. It’s also essential that you don’t close the deal without an environmental assessment paid for by the vendor.

Don’t sign off on any conditions until your financial institution has looked everything over. It can be extremely costly if you involve the bank after your deal has been closed. It’s too late to go back once the transaction has been completed.

Purchasing commercial real estate is far more complex and more expensive than buying a home. There are more factors that you need to consider, and more issues that you need to avoid. Having a team of professionals on your side to help you with the process can drastically improve not only your negotiations, but your chances of not incurring additional expenses that come with uncovering unexpected issues with the property.

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How to Negotiate When Buying Commercial Real Estate Property

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