Depending upon your interest in a commercial property (ie. investor, developer, user), you may look at facts through a different lens. However, almost all decision makers should at least look at all of the following before pulling the trigger on a building:
Market and Comparative Analysis. Understanding the current market conditions and how those affect users locally, regionally, and nationally is one of the most important aspects to know prior to purchasing a building. Are there supply constrains or has demand for the product waned? You will want to also look at pricing data on a short and long-term scale to see how sale and lease comparables are trending. Make sure you are aware of the fluid environment and try to plan ahead for differing circumstances in the market.
Financial Analysis. Does the risk equal the reward? You must understand the true cost of money for acquisition along with the current and projected yields of a property. Adjustable rate mortgages, changing market conditions, and competing investments are all things to consider when evaluating a potential investment. Risk and sensitivity analysis won’t eliminate risk, but it can give you a snapshot into differing scenarios that you may encounter and then you can determine if risk = reward.
Location and Site Analysis. Demographic and psychographic information is often overlooked in the site selection process, yet could have large implications down the road. Is the population in the area changing, and if so, how? This information could affect your tenants, which in turn affect your income. Is there no infrastructure being built or new construction that could impact vacancy rates? Know the market and how changing conditions could positively or negatively impact your location.
Political and legal analysis. Some of the best information you can get is from your local planning department. Most often planners have their pulse on the local economy and what potential changes to code, master plan, or local dynamics can have on a location. Furthermore, local and national politics can sometimes dictate market conditions, so be aware when their is volatility in the market.
Sometimes commercial real estate runs a fine line between moving quickly and winning the deal or taking on someone else’s mistake. No one can ever take all risk out of an investment, but careful analysis can hopefully prepare you for what the future holds.