How to assess your company’s needs when buying commercial real estate
If you’re considering buying commercial real estate, you’ve probably already thought about some of your needs and how a new property might meet them.
However, a real estate purchase is a complex undertaking, and there may be essential needs you haven’t considered.
“You want to make sure your new property will meet your company’s needs for years to come,” says Khurrum Khan, a Business Centre Manager at BDC.
“You should really probe why you feel you want to move and how this new location is going to benefit your business,” says Khan, who has financed many real estate purchases in the Greater Toronto Area.
You should also make sure your new property will allow you to make a smooth transition from your current location with limited disruption to your business, he says.
With this in mind, Khan has identified the following often-overlooked considerations that can help you choose commercial real estate more effectively.
1. Location
It’s essential to find a location that allows you to serve your customers. For retailers and professionals, this means finding a property where it’s easy for your existing customers to reach you and for new ones to discover you. Manufacturers, on the other hand, should think about easy access to and from highways and other modes of transportation, such as the airport, if relevant.
Also, when considering the location of your commercial real estate property, think about your employees. Consider how far they’re going to have to travel to your new location and whether they can get there by public transit, and the impact these factors might have on them.
2. Space
How much space are you going to need as your company grows? Here is where you should look ahead, using your strategic plan to estimate your future needs.
“The new space has to be in line with your forecasts, and the strategy and direction of the business,” Khan says. He encourages entrepreneurs to take a careful look at how they are using their current location. You may be surprised how much space you can save with a more efficient layout—you might not even need to move at all, he says.
An operational efficiency expert should be part of your trusted team when you’re shopping for a commercial property. He or she can advise you on an optimal floor plan and help you evaluate prospective properties accordingly.
3. Configuration
Another often-overlooked but related consideration is a building’s shape and current configuration. Will you be able create a beautiful showroom, if needed? Can you set up your assembly line? Will your sales team be able to interact easily with your production people?
Khan says it’s also important to keep other physical factors in mind, including ceiling clearance if you’re operating equipment or need racking for inventory.
“It all goes back to the question, ‘Is this going to be a smooth transition for my business?’” he says.It’s important to reflect on your plans for the space and whether you can achieve all your goals there. Many business owners are embracing eco-friendly practices. Ask yourself, "Is the roof suitable for solar panels? Can the lighting be made more energy-efficient?” says Khan. You should also factor in the expenses associated with the desired upgrades.
4. Your level of development
It is crucial for your businesses to consider the maturity of your sector and business. As industries accelerate, strategic plans may require adaptation over time.
For instance, a mid-sized manufacturer acquiring a 20,000-square-foot (1,858 square metres) facility may quickly reach capacity, underscoring the importance of scalability in decision-making. You should discern between needs and wants, identifying whether a choice is driven by necessity or desire.
A rise in interest rates can also pose challenges for many companies, particularly affecting financial planning and growth prospects. Ultimately, the question you should ask yourself is: “What will serve my business best?”
By carefully evaluating these factors, you can make informed decisions that align with both your immediate requirements and long-term objectives.
5. Parking
Parking can be a surprisingly hot-button issue, especially in multiple unit locations. Make sure you have enough parking spaces for customers and other visitors, as well as your employees.
Here again, think about your growth plans. Do you expect to attract a lot more customer traffic in the future or to add employees? Now is the time to think about where they’re all going to park. Don’t forget access for trucks, including how many loading docks you’re going to need as you grow.
6. Power, water and sewage
Utilities are another important consideration. Your business may need more electricity, water or sewage than is currently available in a building you’re considering. For example, water and sewage are often important considerations for food processors, while some manufacturers may have special electricity needs.
7. Machinery and equipment
Khan says a move is an excellent time to add or upgrade machinery and equipment. A larger space may allow you to increase your efficiency and productivity with new equipment. An operational efficiency expert can advise you how to make the most of your opportunities.
8. Financing
While your banker might not pre-approve a loan, he or she should be able to ballpark how much financing you can get to buy a property. Knowing this will save you time when shopping for your property.
Your banker can also give you an opinion on how much you could borrow for related expenses, such as renovations, moving costs, and new machinery and equipment. He or she is also a good source of referrals to other professionals, including experienced commercial realtors.
In the end, your best defence against making costly errors is to give yourself lots of time to plan your purchase and find a team of experienced advisors, Khan says.
“Be proactive when you’re thinking about real estate, even in the distant future. It’s challenging to find the right space, so you need to surround yourself with a good, experienced team and take the necessary time to make a good decision.”
Consider building your commercial property
If you have the time and money, think about building your own business place, suggests Khan. It might cost more, but it could better match your needs. No place will ever be perfect, but building to your requirements could come pretty close. This also help you be improve effiency, resulting in important competitive gains.
You can also decide how big it should be and what it looks like. You can choose where to put each part of your business, like the sales floor or the storage room. Later on, if your business grows, you might find it easier to make changes or add more space.
Next step
Find out how to locate the right property, get financing and negotiate the best price by downloading our free guide, Buying Commercial Real Estate.