The Pros and Cons of Buying New and Resale Commercial Real Estate

The Pros and Cons of Buying New and Resale Commercial Real Estate

The decision to buy a resale property versus new construction weighs heavily into the business plan of any investor.

Following are a few points to help investors during the decision-making process:

Custom Build

Pros:

Properties are purpose-built for the needs of the business.
As the economy improves, investors should see substantial returns on newly constructed commercial buildings.
New buildings usually have lower initial maintenance costs.
Utility costs are lower for newly developed properties.

Cons:

Construction can be subject to delays and costly setbacks.
Companies in business five years or less may have additional challenges when planning for future growth. Although business is growing strong and steady now, there may not be enough substantial data to prepare an accurate forecast.

Resale Property

Pros:

Resale properties offer a cost savings over custom-built facilities, as existing structures can be purchased at a lower cost than can comparable custom-built facilities.
Similar to those for new construction, prices should continue to improve with the national economic outlook in most real estate markets.
The money you save on the initial purchase can sometimes offset energy-saving upgrades. You may even qualify for Leadership in Energy and Environmental Design certification and other incentive programs.
In real estate investment, resale properties are the closest thing you’ll get to instant gratification. When the deal closes, the property is yours.

Cons:

As buildings age, they require more maintenance and upkeep.
You may find that your established business outgrows the space, but there is no room for expansion.

Business owners need to view property investment in the long term. A property is not just the location of your business, it is the home of that business. Your business will evolve with the building.

Factors such as location, cost and features need to weigh heavily in the decision-making process. There are many questions you need to answer before moving forward. Will this location accommodate future growth? Is there an existing building for sale that meets your current criteria? If there is a building that meets some or all of your criteria, are you willing to live with the limitations of that building?

Professional advice is required in order to make a sound decision. Real estate agents and lawyers can offer valuable knowledge and insight into the complexities.

Contact a Commercial Real Estate Expert today:

Link LeGrand, CCIM 210-789-5465