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A commercial real estate development project will often represent a lucrative business opportunity for all parties involved. However, significant construction may be needed before a developer can realize the full potential of a property. Whether a new building will need to be built, an existing building will need to be refurbished, or other types of construction will be needed to ensure that a property will be able to serve its purpose, these construction projects can represent a major investment of time and money. To ensure that work will be completed properly, a construction contract will be needed, and the right type of contract should be selected based on the work being done.

Four Types of Construction Contracts

When parties sign a contract, they are making a legal agreement, and they will both be required to meet their contractual obligations. A contract should fully outline the scope of the work being performed and the responsibilities of each party. It should state the price of the project and how this amount may change if unforeseen circumstances occur, and it should detail a payment schedule and the penalties for late payments. Any relevant documents, such as blueprints and specifications, should be included in a contract.

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The decision to buy or sell a commercial property is likely one of the most consequential financial decisions you will ever make. In order to get the best deal possible, proper valuation of the property is essential. An accurate appraisal of a property’s value is also used by lenders when determining how much debt the lender is willing to provide. There are several different approaches used to value commercial real estate properties.

Valuation Methods for Commercial Real Estate

Many people assume that the term “value” is synonymous with “price” or “cost.” Price and cost will certainly influence a property’s value, but they are not interchangeable terms. The value of a commercial property is typically determined by an appraiser. The three main methods for valuing a commercial property include the income approach, replacement cost approach, and market value approach. The valuation approach an appraiser will use depends on several factors including the type of property and how the property will be utilized.

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Wheaton CRE investment attorneysWith more investors breaking into the commercial real estate sector, demand for reliable and comprehensive information on the selling and leasing of property increases. Granted, the information that one finds on the internet must be carefully vetted, and investors are highly encouraged to run all decisions and potential changes by their attorney, as this can help avoid the risk of lawsuits and financial loss. However, with a better understanding of the potential pitfalls, landlords can be better prepared, which can allow them to better plan for their future. 

Being Prepared for the Challenges in Commercial Leasing 

The stakes and risk of financial loss are far greater for the commercial landlord and tenant. There are also some nuanced issues in the CRE market that can significantly alter the needs and concerns of an investor. For example, there are different asset classes in the CRE market, and the challenges tend to vary for each one. In other words, the owner of a low-income apartment will have different needs than a hotel or casino owner. 

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DuPage County real estate attorneysAlthough simpler times have long since passed, a great many people still feel a sense of nostalgia when they step into an old building. Older, convertible buildings can also be a boon for real estate investors, as they are often priced below market value. Unfortunately, it can be difficult to retrofit these buildings to ensure they offer the state-of-the-art technology that most commercial real estate tenants want and need for their businesses. The solution? Find a way to have the best of both worlds. 

When is Retrofitting an Old Building Worth the Cost and Effort?

Not every building can or should be retrofitted. Consider New York’s Pennsylvania Station as an example. The building, though a historical and architectural work of art, had become dilapidated to the point that it was a safety hazard, and the cost of repair was prohibitive. Without another practical use for the space, retrofitting seemed not only impossible, but also pointless. There are buildings that can be retrofitted, however - ones that would greatly benefit the community, investor, and potential tenant.

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DuPage County real estate lawyersThinking of expanding your investment portfolio this fall? Student housing saw a 10 percent increase in value over the past year, even as several other commercial real estate (CRE) sectors experienced a decline. The student housing market is also projected to continue in an upward trend over the next several years. Learn more about how to invest this growing market, and discover how a seasoned real estate lawyer can help you make the first steps. 

Why Invest in Student Housing? 

Student housing is unlike any other CRE sector. It tends to be less volatile since students typically continue to enroll in college, despite (and sometimes because of) economic downturns. Another major advantage to this market is that students typically only sign year-long leases, so landlords can analyze the market each year and increase their rental rates accordingly. Since the rent costs are typically shared between roommates, landlords can also typically charge more per square foot in a student housing unit - especially if they are in a highly desirable location. Lease renewals may also be easier to obtain in areas nearest to campus since students often know well in advance whether they will be returning the following year. 

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