Market Analysis Tips and Tools For Commercial Real Estate Agents

In commercial real estate you need to keep your focus on the trends of the market. You also need to know exactly what exists in your market. Property types, rent types, tenant types, sale prices, and yields all have relevance to the property investor and the strategy that they need to adopt.In times of market and economic change, it is these elements that offer opportunity to buy, sell, and lease property in varying ways. The commercial property market works in cycles, and the choices you make today on a property matter are not likely to be the right choices in a few months time. Property agents and investors that read the market well will make good income from the ‘churn’ of the market.There is no ‘bad’ property market; there is just change and the need to adjust to it. When you adjust, you can do the deals and seize the opportunity. Investors and real estate agents that suffer in ‘down’ economies and property markets are those that struggle with change. Alvin Toffler wrote a great book some years ago on just that point, called ‘Future Shock’. When you understand the principles of change and big events then you can seize the opportunity in the property market at any time. The most successful people in the commercial property market watch for change and move into it with a plan of opportunity.So what do you need to do in this market? First and foremost you need to understand the current conditions which are applying to the market and the subject property.You are looking for indicators which show the:
potential demand for property
absorption of occupied space
future constructed space
business sentiment in the areaThe market study will include an assessment of both the broader region and the local precinct and their potential to satisfy tenant and business growth and decline as it may apply. These two factors alone will largely dictate future rental levels which in turn will affect the potential price of a property.It’s all StrategicEssentially properties that are becoming obsolete are not good investments unless a refurbishment strategy can be applied and be seen to be a successful strategy given prevailing market conditions. Obviously this decision hinges largely on the asset itself and its ability to adjust to refurbishment and or expansion.Occupancy space supply and the success of Commercial Property is influenced by:
competition properties existing locally
land costs current and future
assessments all of all other projects underway
newly constructed properties
demolition of older properties
plans for new properties
building costs in your area currently
rental levels in your area and projections
operating costs for the building
the pressures of available financingThe demand for Commercial Real Estate is driven largely from:
known and predicted pressures and changes on the population
regional and local demographics of the customer and the business community
the spending patterns of the population
growth in major industry locally
natural resources existing to support or require industry
sales volumes of goods purchased (retail property)
rental activity (gross, net, face and effective rents)
incentives offered for new tenants to occupy
services and amenities offered in properties
vacancies now and projected
turnover of sales (retail property)
consumer buying patterns (retail property)
overall prices for comparable propertiesFurther consideration also needs to be given to the potential of expansion or replacement of any competition property within the precinct and also the relationship of such to your subject property. Any competition property needs to be watched for its impact on your investment property.As you can now see, the potential of a Commercial Property cannot be simply assessed from economic activities in the area. There are other pressures which will change and have a reasonable effect on the subject property and these include political changes, legal changes, deterioration of the building fabric, social changes, and rental pressures geared to business sentiment. The property investor becomes a specialist in assessment of these broad investment trends.Commercial real estate agents should monitor all of the above factors to help their clients take up property opportunity as the market allows.

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