Occupancy remains strong compared with other cities, thanks in part to a smaller impact from the work-at-home trend. Even the office category saw a slightly positive net absorption in 2023, even with limited inventory. 

That’s a stark contrast with the national picture, in which the net absorption rate has turned negative for office space in recent months. With more people working at home and interest rates remaining elevated, office leasing has decreased in a number of markets. 

Net absorption is a key decision factor for investors, developers, brokers and prospective tenants. It offers a snapshot of market dynamics such as leasing demand, opportunities and risks. While positive net absorption means demand is strong and growing, a negative reading indicates a contracting marketplace. Besides general economic conditions, changing supply and lease renewal rates can affect net absorption. 

Here’s an overview of what net absorption means and how it influences CRE investment decisions.

Jump to: 

• What does net absorption mean?
• How is net absorption calculated?
• Overall CRE trends
• Branson CRE outlook
• Your resource for CRE in Branson, MO

What Does Net Absorption Mean?

Net absorption measures the change in leased space during a specific time period. 

It tells us the supply and demand dynamics in commercial real estate. It can be calculated for different geographic regions, such as the city of Branson, the state of Missouri or the United States as a whole. It’s also helpful to look at net absorption for individual CRE sectors such as retail or office space. 

While gross absorption tells you the total amount of space occupied within the market, net absorption subtracts the amount of unoccupied space. This gives decision-makers a more accurate read of market conditions. 

• Positive net absorption means more space was leased or sold than was vacated or supplied for a given time period. It indicates healthy demand and a shrinking supply of available square footage. It also suggests that rents are likely to increase. 
• When net absorption turns negative, it’s a sign of weakening economic conditions. It means there is more space available than tenants or buyers are demanding. Rental costs are more likely to decrease when net absorption declines. 

How Is Net Absorption Calculated?

To determine net absorption, you need to know two things: 

• The total amount of commercial space that was rented or sold within a time period of interest, such as a month or a year. 
• The amount of space that became vacant during the same time frame. Vacancies can occur due to prior tenants leaving a particular space, or because of new construction. 

For example, suppose you have an office building that experienced the following changes over the course of a year. Tenants A and B both decided to move from a smaller space to a larger one as their businesses grew.

To calculate net absorption, you would first determine the total new space rented:

• [2000 square feet rented by Tenant A] + [2500 square feet rented by Tenant B] = 4500

Next, you would add up the space vacated:

• [1000 square feet vacated by Tenant A] + [1500 square feet vacated by Tenant B] = 2500

Finally, you would subtract the space vacated from the space that was leased:

• Net absorption = [4500 square feet rented] – [2500 square feet vacated] = 2000 square feet 

Overall CRE Trends

Current economic trends suggest strong rent growth in the industrial space, with ongoing weakness in the office sector. Net absorption for office space has turned negative in recent months, with more vacancies expected in the near term in various commercial buildings. 

Lawrence Yun, Chief Economist for the National Association of REALTORS, points to high interest rates as the leading factor hampering market conditions. Elevated rates put pressure on borrowing activity and raise the cost of refinancing. With buyers skittish about taking on new loans, the price of some commercial properties has fallen. 

Although Yun expects CRE to recover overall, he expects ongoing challenges for the office sector. 

Branson CRE Outlook

While not completely insulated from national trends, the Branson marketplace, known for its diverse commercial real estate listings, enjoys a number of advantages compared to other locations. 

Strong demand, high building costs and a tight labor market have kept all office categories at or near capacity. Class A buildings, for example, enjoyed a 95% occupancy rate for 2023. Class B and Class C clocked in at 92% and 99%, respectively, showcasing the resilience of commercial buildings in the area. 

Looking at all CRE categories, the Branson market was positioned for another strong performance in 2023 with its robust commercial real estate listings. Factors driving growth include strong retail sales and low vacancy rates. The citywide occupancy rate stood at 95% in 2024 with net absorption of 43,656 square feet.

Your Resource for CRE in Branson, MO

At Commercial One Brokers, our expertise is your greatest asset when it comes to commercial real estate in Branson. 

Thanks to decades of experience, we have an in-depth knowledge of the Branson area that no other CRE firm can match. Our comprehensive database contains decades of historical data on commercial buildings and listings. We have helped clients across a range of industries purchase, lease or invest in property in the lucrative Branson-Tri Lakes community.

Whether you’re looking to purchase, lease or invest in commercial real estate, reach out to our experts to discover the best CRE opportunities in the Branson area. Give us a call at 417-334-3149 or contact us online to explore our extensive commercial real estate listings and find your ideal property.

As we begin 2024, Commercial One Brokers is watching a number of opportunities and challenges for CRE investors, owners and tenants in the commercial real estate market, focusing on the latest real estate predictions for 2024. While high interest rates have put downward pressure on transactions, some costs may begin to ease in the year ahead, offering new opportunities in commercial real estate investments. 

With over 60 years of combined experience, we make it a point to provide the most accurate and up-to-date commercial real estate market analysis available to our clients. Our in-depth industry knowledge, as well as long-established relationships within the Branson, Missouri community, enable us to provide the best brokerage service in our area for top real estate markets. 

Here are some of the trends we’re watching as the year unfolds.

#1: Credit Availability

According to a recent Global Real Estate Outlook Survey from Deloitte, real estate owners and investors remain concerned about rising interest rates and the cost of capital. The survey includes respondents from North America, Europe and Asia/Pacific, with results shaping the real estate forecast for 2024. 

With central banks raising interest rates to address inflation, investors have contended with tighter lending standards over the past two years. Global property sales decreased in 2023, and industry insiders expect continued challenges for CRE purchases in 2024. Higher borrowing costs also make refinancing more difficult. About half of respondents expect a continued increase in the cost of capital and a decrease in capital availability. 

With investors becoming more selective when choosing properties, a growing interest in undervalued and newer assets has emerged. Recent and anticipated price declines in some building categories may open up acquisition opportunities for newer investors.

#2: Office & Workplace Trends

Ongoing remote and hybrid workplace models continue to exert pressure on demand for office space. The United States alone has lost over 200 million square feet in the office category since 2020, and vacancies are up in markets around the world. 

Branson, Missouri, which has largely bucked the work-from-home trend, remains highly competitive. Office buildings enjoyed an overall occupancy of 94% in 2022, with occupancies clocking in at 95%, 93% for Class A, Class B and 98% for Class C buildings, respectively. This trend is significant in understanding the commercial property value dynamics in 2024.

Newer, high quality office buildings have also shown resilience in the face of economic headwinds. Investors are showing interest in modernized properties designed to accommodate hybrid work arrangements. Other sought-after characteristics include health and safety features, employee-friendly amenities and desirable locations. 

#3: Retail Demand

Retail properties are showing signs of strength after a period of declines in consumer sentiment. The Branson market finished 2023 with a 95.5% occupancy rate, up from 92% in 2022.  Results included an 99% occupancy rate for Highway 76, 96% for the Branson Landing district and a very tight 99% for the historic downtown area. This resilience is a key factor in the real estate market analysis, highlighting the potential for retail commercial real estate investments and rent increases. 

Factors driving retail tenant demand include industry transformations and larger retailers consolidating in high-quality locations. In fact, store openings outpaced closings in the United States in both 2022 and 2023.

Increasingly, retailers are investing in omnichannel logistics to serve online and brick-and-mortar shoppers. Many physical stores have upgraded their onsite digital capabilities, along with more efficient last-mile distribution. Landlords remain optimistic about continued demand, rent increases and a favorable balance of supply and demand. 

#4: Industrial Space

Markets around the world are seeing sustained demand for industrial space. This is significant for investors focusing on commercial real estate market opportunities in 2024.

In Branson, vacancy stood at less than 5% by the end of 2023. Inventory remains extremely tight for those looking for warehouse space, climate controlled warehouses and office-warehouse spaces. Much of the available inventory lacks the required ceiling heights and loading docks that many occupants require. Suitable land for building industrial space is also in short supply. 

Industrial construction has grown in Southwest Missouri in recent years, echoing a trend in other regions. Factors driving demand for industrial space include e-commerce, third-party logistics providers and reshoring investments. With governments incentivizing new construction to address supply chain issues, more growth is expected in the near term.

Potential challenges for the industrial sector include limited mega-sites on which to build large facilities and access to energy infrastructure. 

#5: Building Sustainability

A full 60% of respondents to the Deloitte survey say firms are not prepared to meet environmental, social and governance standards. Another area of growing concern is increased property insurance costs and limited coverage options in risk-prone areas including California and Florida. 

With 2023 registering as one of the hottest years on record, and an increase in billion-dollar weather events, quality construction and sustainability are high on the wish list for commercial properties. Investors, owners and prospective tenants are seeking out properties that contain energy efficient materials and electrical systems, impacting the commercial property value. Indoor air quality and weather resilience are other top priorities, according to a report from PricewaterhouseCoopers.

#6: Impact of AI Technology

Two-thirds of industry professionals say much of the industry’s technology still relies on legacy systems. Digital upgrades including artificial intelligence provide many opportunities for the CRE industry, offering more informed commercial real estate investments and business decisions.

AI-enhanced technology has a number of possible applications for commercial real estate: 

• Deliver more efficient property search and analysis
• Analyze investment opportunities
• Boost the customer experience
• Streamline research into prospective properties
• Improve fraud detection

Because AI remains a fairly new development, CRE firms and investors are advised to research its potential in order to use the technology responsibly. 

#7: Economic Trends

Positive events in 2023 included a proactive response to banking turmoil early in the year, ongoing consumer demand and stabilized energy and food prices. 

However, most CRE professionals expect revenue to decline in 2024, according to the Deloitte survey. That includes 60% in North America, 66% in Europe and 53% in Asia/Pacific. Most plan to reduce expenses in response to higher costs of recent years. 

Respondents named a number of headwinds facing the commercial real estate forecast in 2024, including tight monetary policy, extreme weather events, increased migration across the globe and the ongoing war in Ukraine. 

Trusted CRE Brokerage Services in Branson, MO

Commercial One Brokers has the experience, in-depth local knowledge and community connections to provide the service you need in today’s commercial real estate environment. We perform the due diligence necessary to identify the best properties for your needs, so you can perform your search and reach a decision in less time.

If you’re looking to buy, lease or invest in commercial property in the Branson, MO area, give us a call at 417-334-3149. You may also contact us online to learn more.

From stylish clothing and accessories to one-of-a-kind arts and crafts, there’s something for everyone in one of Missouri’s most popular shopping destinations.

A number of local and national trends will influence holiday sales as merchants compete for wallet share among increasingly budget-conscious consumers. Much like their peers in other markets, Branson retailers are grappling with a mix of opportunities and challenges this year.

Here is our assessment of the holiday shopping outlook for the Branson area for 2023.

Jump to:

• National Holiday Shopping Picture
• Branson Retail Marketplace Trends
• Advantages of Retail Space in Branson
• Find Retail Space in Branson

National Holiday Shopping Picture

In its annual holiday sales forecast, Deloitte predicts an increase of between 3.5% and 4.6% for a total of $1.54 trillion to $1.56 trillion. Projections cover the time span between November 2023 and January 2024. E-commerce sales are expected to grow 10.3% to 12.8% to reach between $278 billion and $284 billion. 

Positive trends include a healthy job market and income growth. Headwinds include elevated but moderating inflation and a decrease in leftover savings from the pandemic. 

A survey by the National Retail Federation found that 39% of Americans plan to shop early in 2023. A full 61% say deals are more important than last year.

Although Black Friday and Cyber Monday remain popular, many consumers are looking to spread out their purchases in order to stay within budget. Another popular money-saving strategy is to research product offerings ahead of time, including before visiting a brick-and-mortar location. 

Retailers have the opportunity to earn more business by promoting early and offering competitive deals throughout the season. An attractive and user-friendly website is another essential for impressing potential customers as they browse online.

Branson Retail Marketplace Trends

The Branson retail market had a strong performance in 2022, and was expected to remain so in 2023, according to Commercial One Brokers’ annual commercial real estate forecast. Citywide sales tax collections reached $17.6 million, with many retail tenants seeing double-digit sales increases. Strong sales coincided with high occupancy rates and increasing rents for retail tenants. 

Overall retail occupancy stood at 92% for 2022, increasing to 96% excluding the Branson Mall and cold shell space next to Hobby Lobby. Additional occupancy rates came in as follows: 

• Branson Landing district: 96%
• Lakeside Center: 95.6% 
• Historic downtown: 100% 
• Off Highway 76: 89% 
• Hollister: 98%

Retail rental rates were expected to climb in 2023, amid a tight supply and strong demand. Premier locations were predicted to go as high as $30 per square foot, with new and recently completed units reaching the low $20s. Increased operating expenses may curtail some rent increases.

Advantages of Retail Space in Branson

From its reputation as an entertainment capital to its beautiful natural surroundings, there are many great reasons why Branson is a great place to do business. Here are a few big advantages of locating a retail business in the Branson metro area: 

• It’s a top tourist destination: Branson welcomed 10.2 million visitors in 2022, according to the Branson-Lakes Area Chamber of Commerce. Every year, our community welcomes folks from just a few miles away and from across the globe.
• It’s a short drive for many: Did you know Branson is just a one-day drive away for one-third of the U.S. population? That makes it the perfect place for a day trip or weekend getaway. 
• Shopping is the #1 activity: From the Branson Landing to The Shops at the Grand Village and so much more, there’s no shortage of retail destinations to serve a national customer base.
• Something for all ages: With so much to offer, it’s no surprise that Branson is a favorite destination for kids, couples and seniors. 

Find Retail Space in Branson

Choosing the best location is one of the most important decisions you can make when it comes to the success of your retail business. Factors to consider include your target market, competitors, projected sales and, of course, your budget. 

Competition is fierce for those looking to enter the Branson retail marketplace. First and foremost, your top priority is to find the right space for your storefront. 

Consult with Commercial One Brokers before searching for retail space in the competitive Branson market. With over 60 years of combined experience, we have the in-depth knowledge and research acumen to guide your decision. We present you with a list of the best retail properties available, so you don’t have to waste time and money on bad leads. 

If you’re looking to open a new retail store in the Branson metro area, give us a call at 417-334-3149 or contact us online to learn about available properties.

Managing a commercial property, on the other hand, is no small task. 

Daily operations require marketing, tenant relations and maintenance skills. It also requires substantial knowledge of leasing agreements, employee relations and regulations. 

Rather than deal with these complexities on their own, many investors turn to an experienced property manager. Put simply, property management is third-party oversight of a commercial property on behalf of the owner. 

Many investors find that property management helps control costs, boost profits and maximize value. Property management clients may include individual investors as well as developers of office buildings, shopping centers, industrial facilities and apartments. 

At Commercial One Management, we offer property management services for the Branson and Tri-Lakes area. Whether you’re new to CRE or you need assistance with an existing property, here are the basics of property management.

Jump To:

• Benefits of Property Management
• Types of Property Management
• Responsibilities of Property Management
• Cost of Property Management
• How to Hire the Right Property Manager

What are the Benefits of Property Management?

There are many reasons why CRE investors turn to rental property management companies. 

If you have multiple properties in your portfolio, tending to the daily needs of each one can become overwhelming. In addition, you may lack the expertise to handle the various facets of managing properties, like marketing, maintenance and accounting. 

By hiring an experienced property manager, you benefit from their specialized knowledge and skillset:

• In-depth knowledge of laws and regulations pertaining to your property
• Ability to handle maintenance and repairs
• Marketing skills for attracting and retaining tenants
• Specialized knowledge of specific categories, such as retail, office or industrial

By handling day-to-day operations for you, your property manager frees you up to engage in other business activities. In many cases, hiring a property manager ends up costing less than attempting to handle all management responsibilities yourself. Many landlords often include management fees in the Common Area Maintenance charges paid by the tenants. 

Types of Property Management

For starters, property management services can be customized for different types of properties. Here are a few examples: 

• Residential management handles rental properties on behalf of a landlord. Examples include single-family homes for rent, along with apartments, condominiums, townhomes and vacation homes. 
• Commercial properties may include office buildings and professional spaces like doctors’ offices or even co-working facilities. The commercial category also includes retail establishments such as malls, gas stations and restaurants, along with hotels and similar public accommodations. 
• Industrial property management covers heavy manufacturing such as auto plants and light manufacturing facilities such as food packaging. Warehouses and distribution facilities are also included. 
• Special purpose facilities have unique characteristics that require specialized expertise. Examples in this category include theaters, sports arenas, resorts, assisted living communities, schools, universities and places of worship. 

Responsibilities of Property Management

Your property manager may handle all operational activities or just a few services, depending on your needs. Successfully running a commercial property requires a number of essential tasks, including:

• Working with tenants: The property manager collects rent on behalf of the owner. In addition, they may handle screening of prospective tenants, negotiating and drafting new lease agreements and renewing existing leases.
• Marketing the property: Attracting new tenants and customers requires a thorough understanding of the business environment and marketplace dynamics. The property manager devises and executes a coherent strategy for attracting the most profitable tenants to the facility. 
• Maintenance and repairs: The property management team may include a range of professionals to keep the building and grounds in excellent condition. Services include landscaping, plumbing, roofing and janitorial service. A good property manager will schedule preventive maintenance, recommend facility upgrades as needed, and promptly handle emergency repairs. 
• Financial responsibilities: The property manager must develop a budget and monitor expenses and revenues meticulously. They handle accounting, taxes and other expenses, and maintain accurate financial records on behalf of the owner. 
• Legal requirements: Property managers must possess a thorough knowledge of all applicable laws and regulations at the local, state, and federal levels. Many even keep a lawyer on retainer to ensure full compliance. 

Cost of Property Management

Property managers typically earn revenue by charging a percentage of rental payments. They may also charge various fees for specific services. For example, some will charge a fee for signing new tenants or renewing existing tenants. Others will charge a markup to cover maintenance or advertising costs. 

Factors influencing property management costs include your location, tenant quality, type of property and services included in the management agreement. 

How to Hire the Right Property Manager

There are several criteria you’ll want to keep in mind when choosing a property management company to handle your investment.

• Experience: Look for someone with a track record of managing the types of properties you own. They should also have thorough knowledge of the geographic areas where your properties are located.
• Company strength: Research the firm’s longevity, stability and staff turnover rates. 
• Reviews: Seek out the opinions of current and former clients. Read online reviews for the company’s strengths and weaknesses. 
• Credentials: Most states require property managers to be licensed, so verify that the one you choose has the proper credentials. Property managers can also earn professional certification as an Accredited Commercial Manager through the Institute of Real Estate Management. 
• Professionalism: Your property manager is your face to tenants and customers, so you need someone who’ll make a good impression. The individual who handles your property should have honesty, integrity, and good people skills. 

Learn More About Property Management in Branson

Many commercial real estate firms also offer property management services. At Commercial One Brokers, we have over 60 years of combined experience in the Branson and Tri-Lakes area. Our clients depend on us for unparalleled service, from maintenance and repair to marketing and tenant relations. 

If you need dependable property management service, give us a call at 417-334-3149 or contact us online at any time.

As a result, demand for office space has remained healthy in our area.

In fact, almost all building classifications were near capacity in 2022, according to Commercial One Brokers’ 2023 commercial real estate forecast. Class A and B were down slightly but remained strong at 95% and 92% occupancy, respectively. Class C reached a very tight 99%. 

Occupancy rates have remained at these record levels throughout 2023 and are expected to remain through the end of the year. 

Many businesses, especially small companies and startups, find it more economical to rent office space than to purchase an entire commercial property. Renting provides the flexibility to move as the business grows and needs change over time. 

Commercial One Brokers has a wealth of experience and in-depth local knowledge to help businesses of all sizes rent office space in the highly competitive Branson market. Here are our current insights on the current office environment and tips for finding the right space.

Jump to: 

• CRE & Office Space Trends
• Branson Office Space Market
• Tips for Renting Office Space
• Work with Trusted CRE Professionals

CRE & Office Space Trends

According to the National Association of REALTORS®, overall commercial leasing slowed in the second quarter of 2023. Analysts expect delinquency rates to rise in the second half of the year, stemming largely from lingering cost pressures on many businesses. A number of CRE sectors have seen slower rent growth and higher vacancy rates. 

With many employers adopting hybrid work arrangements in the wake of the pandemic, office vacancy rates reached a record high of 13.1% in the first half of 2023. Tenants in numerous markets have decreased square footage per person requirements, as the industry adapts to changing work patterns and needs. 

Branson Office Space Market

The office rental picture remains tight in the Branson metro area. Commercial One Brokers anticipates no significant vacancies on the horizon, with a number of factors holding back new construction: 

• High building costs
• Tight labor market
• Limited material supplies

Class A 

Branson area Class A office buildings posted a 95% occupancy rate in 2022, with over 101,000 square feet occupied out of a total of over 107,000 leasable square feet. New leases in 2023 have increased to $12 to $13 per square foot, with new vacancies increasing from $13 to $14. More vacancies could appear as landlords increase renewal rates and if economic weakness continues. 

Class B 

Class B buildings had an occupancy rate of 92% for 2022. Out of approximately 120,000 square feet of leasable space, about 110,000 were occupied. Rents increased 6% to $10.60 per square foot, with additional increases of 4% to 5% expected during 2023. Inventory is expected to remain tight in the near term. 

Class C 

Class C office buildings finished 2022 with an occupancy rate of 99%. Just over 122,000 square feet were occupied out of a total leasible square footage of over 123,000. Rents increased by 3% to reach $10.13 per square foot. 

Tips for Renting Office Space for Your Business

There are many factors one must consider when selecting office space to rent. As with most real estate decisions, location is the biggest priority. Other considerations include parking, security, visibility, tenant synergy and the cost of any infill or redecorating required.  

Prospective tenants are also advised to make a checklist of needs before selecting office space to rent. Good questions to ask might include: 

• Does your office need a waiting area for clients?
• How many restrooms do you need?
• Would you like a kitchen or break area?
• Do you need one or more conference rooms or presentation spaces?

Location  

An ideal location will provide convenient access for clients and, preferably, short commute times for most employees. Speak with current or former tenants to get their overall impression of the area and the surrounding neighborhood. Are there restaurants nearby for taking clients or job candidates to lunch? What are the crime patterns in the area? 

Building  

Important building characteristics include aesthetics, age of the building and convenient access to your office. 

First, consider building aesthetics. You want a location that will make a good impression on customers and provide a pleasant work environment for employees. The commercial property for rent must have an exterior that is well-maintained with a clean, professional appearance. Make sure the building has adequate parking for clients and employees. 

Second, the age of the building may affect more than just appearance. For instance, newer buildings often have higher quality heating, air, plumbing and electrical systems. If you are considering space in an older office building, be sure to inquire about whether these essential systems are up-to-date and well-maintained. 

Third, make sure the building has adequate security. Customers and employees should feel safe when entering and leaving the property. Check for security cameras, alarm systems and other security features. Ensure that essential equipment will be safe from theft or vandalism when your office is closed. 

Finally, interview the landlord, and get reviews from current and former tenants. Important criteria include professionalism, reliability and friendliness. 

Space 

Choose an office space that’s big enough to fit your team and all essential equipment. Allow some room for expected growth, such as hiring new employees, but avoid too much extra space, as this is a waste of valuable resources. 

Decide whether you need separate offices for individual employees, or whether an open layout would work best for your team. Check with the landlord on what changes you’re allowed to make to your space. For example, would you be allowed to paint the walls in your brand colors? Would you be able to change the flooring, lighting or other aesthetic features? Would you be permitted to add or remove walls? 

Ask the landlord who will be responsible for maintenance and repairs, both before and after you move in. Will the landlord take care of any needed fixes before you occupy the space, or will you need to take care of that yourself?

Cost   

Set a budget range before you begin your search. Estimate how much space you can afford. Consider the total costs associated with your lease, including rental payments, utilities, maintenance and various other fees. Think about how long you plan to lease the location. Do you anticipate moving to a different space in the future? Or do you plan to make this your company’s permanent home? If you anticipate moving, ask the landlord about penalties for exiting the lease early. 

Work with Trusted CRE Professionals 

Whether you’re a startup or an established business seeking a new location, working with a reputable commercial real estate firm is essential for selecting high-quality commercial real estate listings and offering the best office space to rent. 

Above all, you need experienced real estate professionals who listen carefully to your needs in order to find the best solutions. A trusted CRE firm will have a deep understanding of the local market and a keen eye for the best location for different types of businesses. They will also have extensive knowledge of leasing contracts. 

At Commercial One Brokers, we have over 60 years of combined experience with commercial real estate in the Branson area. We’ve helped numerous clients of all sizes and budget ranges find the best office space for growing their business. 

If you need office space for your organization but aren’t sure where to start, call us at 417-334-3149 or contact us online today!

Banks and other lenders have also curtailed lending activity and tightened standards. In the second quarter of 2023, CRE loan originations from banks decreased by 69% from one year ago, while the dollar volume for investor-driven lenders fell 60%. 

If you’re planning a commercial real estate purchase, knowledge is power when it comes to obtaining a loan and getting the best rate possible. That’s especially true in today’s challenging business environment.

In this article, Commercial One Brokers walks you through the basics of CRE lending. We’ll go over different types of loans, what lenders are looking for and how to apply for CRE financing. 

Jump to: 

• CRE Lending Basics
• CRE Loans vs. Residential Loans
• Types of CRE Loans
• CRE Lending Standards
• CRE Interest Rates & Other Costs
• Applying for a CRE Loan

CRE Lending Basics

Just like a residential mortgage, a commercial real estate loan is a secured loan. This means the property itself serves as collateral held by the lender until the loan is repaid. And as with a home loan, defaulting on a commercial property loan could result in foreclosure. 

The biggest difference is that CRE loans are exclusively issued for properties intended to produce income for the owner, rather than for residential purposes. A CRE loan can be used to finance the following types of purchases: 

• Existing commercial building space
• Land for a new facility
• Financing to build a new facility
• Renovations to existing commercial space
• Equipment or machinery for business operations 

Banks and independent lending firms are the primary originators of CRE loans. Other sources of financing may include insurance companies, pension funds, private investment firms and the Small Business Administration. 

CRE Loans vs. Residential Loans

Put simply, while residential mortgages are issued to individual borrowers, commercial real estate loans are exclusively for business entities. These may include corporations, developers, limited partnerships and other types of business organizations. 

Here are a few other key features that distinguish CRE loans from their residential counterparts.

Loan Term

The most common type of residential loan is the 30-year fixed rate mortgage that most people are familiar with. One popular alternative is a 15-year fixed rate mortgage in exchange for a lower interest rate. The loan is amortized as the borrower repays the debt in regular monthly installments over a fixed period of time. 

A commercial mortgage may be for as little as 3 years or as long as 25 years. Another key difference is that the amortization period is often longer than the term of the loan.

Loan-to-Value Ratio

Loan-to-value ratio (LTV) measures the amount of a loan as a percentage of the value of the property. For example, suppose you acquire a $900,000 loan on a property valued at $1 million. You would calculate the LTV as follows: 

($900,000÷ $1,000,000) * 100 = 90%

A lower LTV typically qualifies for more generous financing. Why? When the LTV is low, it means the borrower has a higher financial stake in the property, which lowers the risk to the lender. 

A typical residential loan can have a LTV of about 95%, with some USDA and VA loans reaching as high as 100%. Commercial loans are usually much lower, with common LTV ratios ranging from 65% to as high as 80%. 

Loan Repayment Schedule

As noted earlier, commercial loans may range from 3 to 25 years. Additionally, the amortization period is often longer than the repayment term. Here’s an illustration:

• Suppose a borrower obtains a CRE loan with a term of 10 years but an amortization period of 30 years.
• The monthly payment is calculated based on what it would take to repay the loan in 30 years.
• After 10 years of monthly payments, the borrower makes a final balloon payment that covers the remaining balance.
• The longer the repayment schedule, the higher the interest rate the borrower will pay.

Types of CRE Loans

The most common type of commercial real estate loan is a traditional CRE loan. Other options include SBA loans, bridge loans, hard money loans, conduit lending and peer-to-peer lending. 

Traditional Commercial Loans

This is the most straightforward option and is ideal for businesses with healthy credit. Most banks and other lending institutions offer secured commercial mortgage rates to creditworthy borrowers. Traditional loans typically come with a long repayment term. 

Small Business Administration

For small businesses looking for lower rates, SBA loans are partially guaranteed by the U.S. Small Business Administration and issued by partner lenders. One caveat is that complex requirements may lead to funds being disbursed more slowly than with traditional loans. 

Bridge Loans & Hard Money Loans

A bridge loan may be an attractive option for short-term real estate investors and those looking to out-bid all-cash buyers. The borrower gets access to a lump sum of cash but with a shorter repayment term than other loans. Borrowers should be prepared to refinance if the loan isn’t paid off quickly. 

A hard money loan is similar to a bridge loan, except it is offered by private lenders rather than banks or credit unions. It also carries shorter repayment terms at higher interest rates. It may be helpful for buyers who need short-term financing and those who don’t qualify for bridge loans by traditional lenders. 

Conduit & Peer-to-Peer Lending

Conduit lenders are brokers who sell loans on behalf of other lenders in return for a commission. CRE loans are often bundled with other loans and sold to investors. They are typically used by businesses seeking greater leverage, lower interest rates and protection for personal assets. 

Peer-to-peer lending is when individuals fund loans rather than banks or other commercial lending organizations. They are commonly used by investors who are looking to take on greater risk and borrowers with less-than-perfect credit. 

CRE Interest Rates & Other Costs

As with other types of financing, there are multiple factors that determine the interest rate on a commercial real estate loan. These include borrower creditworthiness, standards of individual lenders and the terms of individual loans. 

Borrowers must also be prepared to cover a number of fees in addition to loan payments. Some costs must be paid up front before the loan is approved, while others are applied on an annual basis. Common fees include: 

• Appraisal costs
• Legal fees
• Loan application fee
• Loan origination fee
• Survey fees
• Environmental reports

Most CRE loans come with prepayment restrictions to protect the lender’s anticipated yield on the loan. If the loan is paid off before maturity, the borrower may be hit with one of the following penalties: 

• Prepayment penalty: The outstanding balance is multiplied by a fixed prepayment percentage.
• Interest guarantee: The lender receives a minimum amount of interest even if the loan is paid in full early.
• Lockout: The loan may include a minimum term during which the borrower cannot repay the loan in full. The lockout term may be 5, 10 or other predetermined number of years.
• Defeasance: The borrower may pay a penalty for exchanging new collateral, such as U.S. Treasuries, in place of the original loan collateral. 

Applying for a CRE Loan

Prospective borrowers are adopting a variety of strategies amidst the current high interest rate environment. Many are seeking shorter loan terms, while others are seeking greater prepayment flexibility in hopes of refinancing if rates fall in the future. Those with existing commercial lending terms are seeking more extensions or modifications in hopes of preserving the low payments they may already enjoy. 

Whatever approach you choose, the basics of applying for a commercial real estate loan remain. Here are the steps involved in obtaining CRE financing.

Personal Finances

First, commercial lenders will take a look at a borrower’s individual finances. Here are a few criteria of interest.

• Credit score: The higher your score, the lower your interest rate. A minimum of 680 is preferred for SBA loans. Paying off outstanding debts and reducing loan balances are good tips for increasing your score.
• Debt-to-income and net worth: Both of these metrics indicate a borrower’s financial stability and responsibility. Lenders will examine what percentage of your income goes to paying debts. Your net worth is a measure of financial assets minus outstanding debts. 
• Liquefiable assets: Borrowers should be prepared to share bank statements and other documents as proof of ability to repay debts.
• Financial history: Lenders will take a look at tax returns, as well as any recent foreclosures, bankruptcies or loan defaults on your record.

Business Finances

As with individual borrowers, lenders will consider the financial health of business entities involved in a CRE purchase.

• Business credit score: This typically falls between 0 and 100. Lenders generally prefer 75 or higher. A robust personal credit score may sometimes offset a lower business credit score. 
• Business assets: This is any assets that could be liquidated to cover a loan. Examples include cash on hand, pending invoices and equipment.
• Net operating income (NOI): This is the entity’s profitability after expenses are paid. Many lenders require a minimum NOI to qualify for financing.
• Time in business: In general, the longer you’ve been in business the better. Some lenders require a minimum number of years. Be prepared to share tax returns as a reference. 
• Business licenses: Be prepared to share any licenses or certifications required for your industry or jurisdiction.

Property of Interest

The lender will need to see the following information on the property of interest:

• Physical address
• Type of property, such as office, retail, mixed use or multi-family
• Owner occupancy rate, which means the % of leasible space to be occupied by a particular business
• Sale price of the property
• Amount needed for post-purchase renovations
• Revenue-generating tenants already present
• Expected earnings from revenue-generating tenants

Application Process

As with other types of loans, prospective borrowers should come prepared when applying for CRE financing. Here are a few essential steps for getting a loan at the most attractive rate possible:

• Have all required information collected and ready to submit. 
• Apply for multiple lenders to find the best deal. 
• Apply to all within a 30-day window to avoid a negative hit on your credit report.

The lender will review your application and have the property appraised before reaching a decision. The CRE application process may last from a few days to a few months, depending on the property and amount of information involved. 

Trusted CRE Experts

Commercial One Brokers has over 60 years of combined experience in Branson commercial real estate. Our in-depth industry knowledge and connections within the Branson community enable us to provide the unmatched service our clients expect.

If you’re looking to purchase commercial real estate in the Branson area, give us a call at 417-334-3149 or contact us online today for more information.

As with all investments, profit potential is your main consideration when comparing different properties. How can you be confident that the money you invest today will generate a healthy return in the future?

That’s where net present value and internal rate of return come in. These metrics give you an estimate of whether a potential investment will generate a profit or loss. They also consider the present value of your investment in today’s dollars.

• Net present value – or NPV – is the difference between the present value of expected cash inflows and the present value of cash outlays over a defined period of time. It is expressed as a dollar amount. 
• Internal rate of return – also known as IRR – is the estimated annual growth rate. It is expressed as a percentage. 

Let’s take a closer look at how to use these metrics when assessing and comparing commercial real estate opportunities.

Net Present Value

Net present value considers all expected cash flows over the life of an investment. 

• NPV equals the difference between cash inflows and cash outflows. 
• An NPV greater than zero generally indicates a profitable investment.
• A negative NPV means the investment is more likely to lose value. 

Factors to consider when estimating NPV include anticipated inflation and reinvestment rates. 

How to calculate Net Present Value   

To determine the NPV, follow these steps:

• Estimate your likely cash flows, using a discount rate to estimate present value.
• Subtract estimated cash inflow from your initial cash outlay.
• The difference is the net present value of the investment.

Cash flows will vary over time for many investments. For example, inflows may be greater in some years than in others. 

Analysts use the following formula to estimate the timing and amount of expected cash flows across the life of the investment.

 Net Value Present Formula:

Ct = Net cash inflow during period t 

C0 = Total initial investment cost

i = Discount rate

t = Number of time periods

Analysts use a discount rate that is equal to the minimum acceptable rate of return. It is based on the principle that inflation erodes the value of money over time, so that a dollar today is worth more than a dollar tomorrow. A positive NPV generally indicates that the rate of return is likely to be greater than the discount rate. 

Internal Rate of Return

The internal rate of return is useful for comparing multiple investments on a fair basis. This is helpful if you are considering more than one commercial property. IRR estimates the annual rate of growth a property is expected to generate. The higher the number, the greater your earnings potential. 

One common question is how IRR is different from return on investment, or ROI. The key difference is that ROI calculates the percentage increase or decrease in value for the investment as a whole. IRR, on the other hand, considers the variation in cash flow across individual time periods, along with the present value of future dollars. 

How to calculate Internal Rate of Return

Mathematically, IRR is the discount rate at which the net present value of cash inflows is equal to your initial investment. 

To determine IRR, use the following steps:

• Apply the same formula as you would to calculate the net present value.
• Set the NPV to zero.
• Solve for the discount rate.

If the IRR is greater than the expected discount rate, the investment is more likely to be profitable. If it is less than the discount rate, the property is less likely to earn a profit. 

Special Considerations for Using NPV & IRR   

Although NPV and IRR give you helpful information for assessing commercial properties, there are some caveats to keep in mind.

For starters, future cash flows are difficult to predict. As we’ve all seen in recent years, market conditions may change in response to unexpected events. Many analysts will calculate more than one estimate reflecting a range of possible scenarios, from conservative to optimistic. 

The rate of return for most investments will vary from year to year, even during times of relative market stability. You can expect that the actual performance of a commercial property will differ somewhat from the NPV and IRR calculated. 

It’s always essential to look at multiple factors when making investment decisions. Examples include up-front expenses and investment duration. You’ll also want to consider the level of risk and time commitment you’re prepared to take on. 

Most analysts use specialized software to calculate NPV and IRR for you, so you won’t be expected to work the equation by hand. 

Choosing an experienced commercial real estate broker will help you sort through all of the information you need to make a wise investment decision. With over 60 years of combined experience, Commercial One Brokers has the in-depth knowledge to provide the best service possible.

We invite you to contact us today to learn more about the exciting opportunities available in the Branson, Missouri area.

Education, experience and a good reputation are all attributes to consider when choosing a commercial real estate broker. However, what puts some brokers above the rest is a CCIM certification. 

What is a CCIM? Find out why you should work with someone who has earned a CCIM designation. 

Jump To:

• CCIM Designation Definition
• Become a CCIM
• Value of CCIM Designation

Understanding the CCIM Designation

A CCIM, or certified commercial investment member, is someone with a proven track record serving commercial real estate clients. 

CCIMs aspire to be the best in their field. This designation represents a level of experience and dedication that goes beyond that of the average commercial real estate professional. Out of all the CCIM designees currently active in commercial real estate, 67% have a title of owner, partner, principal, president, vice president or broker. 

Becoming a CCIM requires a high level of quality work in commercial real estate. Less than 10% of all commercial real estate professionals have this designation. Professionals who earn a CCIM certification prove that they have what it takes to succeed in commercial real estate and do so ethically. 

How to Become a CCIM

A CCIM designation shows colleagues and clients that you’re excellent at what you do. You’ve put in the time and effort to build your transactional portfolio and continue learning about the commercial real estate industry. 

Different membership types have varying requirements, but all levels require an educational component, with most requiring a portfolio of qualifying experience. 

The entire CCIM program typically takes one to three years to complete, though in rare cases, CRE professionals have completed a CCIM certification in as little as six months. 

CCIM Courses & Education

Potential CCIM designees must take courses on different aspects of commercial real estate, including market analysis, decision analysis, negotiations training and ethics. 

Portfolio

Most CCIM membership types require a transactional portfolio that shows quality of work as well as a breadth of commercial real estate experience. This portfolio must include proof of at least one of the following: 

• Three or more qualifying activities totalling $30 million or more; 
• 10 qualifying activities totalling $10 million or more; or 
• 20 qualifying activities with no specific dollar amount required. 

Exam

After taking the educational courses and submitting a portfolio, potential CCIM designees must take a comprehensive full-day exam that tests mastery of the concepts introduced in the courses. 

CCIM Board Interview

The final step of receiving a CCIM designation is interviewing in front of the CCIM board. During this interview, the prospective designee is asked questions about their experience and how they approach commercial real estate. 

Is a CCIM Designation Worth It?

Why does a CCIM designation matter to clients? In the commercial real estate world, a CCIM designation is as good as gold. It proves that you not only know the industry but also have a track record of ethical, successful business transactions. (What all potential clients want to hear!) 

If you’re not familiar with commercial real estate, you might not understand how this benefits you as a client. There are several reasons why commercial real estate investors should seek out a CCIM.

CCIMs help you: 

• Make informed decisions. CCIMs help you make decisions based on their years of experience, with designees averaging 22 years in the organization.
• Maximize return on investment. CCIMs have proven track records. Working with an expert can maximize your return on investment and give you peace of mind.
• Create a stronger strategy. You’ll develop a commercial real estate strategy alongside a professional with a historical knowledge of industry trends—giving you a leg up! 
• Ensure ethics. A CCIM is someone who has proven to be honest and law-abiding. You’ll work with a professional you can trust who knows the ins and outs of commercial real estate ethics.

Investing in commercial real estate impacts you and others for years to come. Knowing the commercial real estate professional you’re working with has a proven track record of successful business and an interest in continued education in the field can give you peace of mind when making investment decisions. If you’re looking to buy or rent a commercial property, you’ll be in good hands with a CCIM.

Looking for commercial real estate in Branson, MO? Then you’ll want to work with the only CCIM-designated brokerage in Branson: Commercial One Brokers. 

Steve Critchfield and Robert Huels of Commercial One Brokers have 36 years and 29 years of experience, respectively. They both hold CCIM certifications and are ready to help you find a property in Branson, MO. 

Reach out to our CCIM-designated team today! We’ll help you find the perfect commercial property for your business. 

…

Article written by Steve Critchfield, CCIM, of Commercial One Brokers. Steve has more than 36 years of experience in commercial and investment real estate. He is active in many Branson, MO organizations, including The Branson Lakes Chamber & CVB, The Tri-Lakes Board of REALTORS and the Taney County Partnership, to name a few. 

Find Steve on LinkedIn. 

If you’re new to the world of commercial real estate, you may be unsure how to get started.

Commercial real estate, or CRE, refers to property that is used exclusively for business purposes. You make money in CRE by selling it, holding it or leasing it to tenants for income-generating purposes. Local zoning laws determine which properties will be designated for commercial use and which will be residential spaces. 

Tips for success in commercial real estate include determining your investment goals, developing a business plan and working with an experienced CRE broker. You’ll also want to familiarize yourself with the basic industry terminology. For example, it’s essential to know the different types of CRE available on the market. Other topics to learn include different methods for investing in CRE, key performance metrics and parameters for leasing commercial property.  

Jump To:

• Types of Commercial Real Estate
• Investing in Commercial Real Estate
• CRE Performance Metrics
• Leasing Commercial Real Estate

Types of Commercial Real Estate

The four main categories of commercial real estate are office, industrial, retail and multi-family.

Office Space

Office space refers to properties that are mainly used for corporate and professional workspaces. This category is subdivided into Class A, B and C properties.

• Class A office buildings feature a luxury, modern aesthetic and are located in high-demand areas. Most feature new or fully remodeled construction, state-of-the-art infrastructure, reliable service and desirable amenities.
• Class B properties are in good condition and feature quality construction. However, they lack the modern aesthetic and high-demand locations of Class A properties. They are an attractive option for those looking for a balance of quality and affordability.
• Class C buildings require significant renovation, offer few modern amenities and are typically located on the outskirts of a city or community. They can also be characterized by lower demand and a somewhat dated aesthetic appearance.

Industrial Use

Properties for industrial use are designed for manufacturing, logistics and similar activities. They are heavily regulated by zoning laws and other policies. Examples include heavy manufacturing, light assembly, warehouses and other storage facilities and even oil refineries. 

Retail

This category includes properties intended for purchasing goods and services by end consumers. All of the following are examples of retail facilities: 

• Hotels
• Resorts
• Casinos
• Shopping centers and malls
• Restaurants and bars
• Hair salons and spas
• Laundromats
• Department stores and clothing boutiques
• Gyms and sports centers
• Other establishments

Multi-Family

It may sound counterintuitive to think of an apartment building as a commercial property, since people live there. Multi-family properties are a special type of commercial real estate owned by a landlord and rented to tenants exclusively for residential use. Besides apartments, other examples might include townhouses, condominiums, duplexes or even assisted living communities with dwelling space available for rent. 

Investing in Commercial Real Estate

The two main options for investing in commercial real estate are direct and indirect investment.

Direct Investment

Direct investment involves owning and/or managing a commercial property yourself. It is best to work with an experienced CRE firm to advise you on researching and purchasing the best property to meet your goals. The primary way to earn a return on your investment is to collect rent from commercial tenants, or from residential tenants in the case of a multi-family property. 

It is highly recommended that you enlist the services of a professional property management company to assist with the responsibilities that come with ownership. Services include finding, managing and retaining tenants, as well as overseeing leases and financing. Property managers also coordinate basic upkeep and marketing for the property. 

Indirect Investment

Indirect investment means holding securities or investment funds that own shares of commercial real estate. One popular example of indirect investment is real estate investment trusts, or REITs. A REIT is a publicly traded entity, similar to a publicly traded stock, which provides a feasible opportunity for more people to invest in commercial real estate. 

CRE Performance Metrics

As with all investments, there are key metrics for measuring the performance of commercial real estate. They are useful for gauging profit potential and for tracking your investment over time. 

Cap Rate

The capitalization rate, also known as cap rate, measures the risk of buying a particular commercial property. It is the ratio of net revenue to current market value of the property. A higher cap rate indicates higher risk and a lower initial investment, while a low cap rate indicates a higher property value and lower risk. Cap rates will fluctuate over time in response to market conditions. 

Internal Rate of Return

The internal rate of return, or IRR, projects the future value of an investment in today’s dollars. Unlike traditional measures like return on investment, IRR considers the time value of money and cash flow. It is an ideal tool for assessing the potential value of a property. 

Cash on Cash Return

Cash on cash return (COC) measures the return on cash invested during a defined time period. It calculates the cash income earned in relation to the amount invested.

Sometimes referred to as cash yield on a property investment, COC is often used for investment properties that involve long-term debt borrowing. It is also used to project potential future cash flow. 

Net Operating Income

Net operating income (NOI) assesses the profitability of a commercial property. It equals the sum of all revenue minus operating expenses. NOI is a pre-tax figure that excludes principal and interest payments on loans, capital expenditures, depreciation, amortization and income taxes. 

Sources of revenue include rental payments and fees collected by the landlord. Operating expenses include the cost of running and maintaining the property. These may include insurance premiums, legal fees, repairs and janitorial services. 

Leasing Commercial Real Estate

The most common CRE arrangement involves an investor or group of investors collecting rent from commercial tenants. Lease rates are typically quoted in terms of cost per square foot. 

Types of Commercial Leases

Four main types of commercial property leases include: 

• Single net lease: The tenant pays property tax in addition to rental costs.
• Double net lease: The tenant pays property taxes and insurance.
• Triple net lease (NNN): The tenant pays property taxes, insurance and maintenance.
• Gross lease: The tenant only pays rent. The landlord pays property tax, insurance and maintenance.

How to Determine Rent

Landlords calculate rent based on rentable square feet, which includes usable square feet and a percentage for common areas such as public restrooms, conference rooms, elevators, stairs and corridors. 

Usable square feet refers to the entire space a business occupies, including storage and restrooms. 

Monthly rent payments are determined by multiplying rentable square feet by the rental rate. Commercial tenants can expect to pay approximately 5% to 10% of gross sales per foot on rent. Sales per square foot is calculated by dividing gross sales by square feet. 

A typical commercial lease term ranges from 1 to 10 years, with office and retail leases averaging 5 to 10 years. Choosing a longer leases often enables the tenant to lock in costs.

Besides rental payments, here are other costs tenants can expect to pay:

• Common area maintenance fees
• Percentage rent, which is the base rent plus a percent of sales to the landlord
• Security deposit
• Utility costs

Are you looking into commercial property investments? Not sure where to start? You’re in the right place! Get in touch with Commercial One Brokers today to learn about commercial investment opportunities in Branson, Missouri.

As with many of life’s choices, investing in commercial property has risks and rewards. As a first-time investor, you want to do all you can so your first deal goes well, and you avoid risks down the line. 

Before you dip your toes into the CRE investment waters, educate yourself about the types of commercial properties and explore current market trends. You should also research how a typical commercial real estate deal takes place. 

Need a starting point? We compiled the top commercial property investment tips from our experts at Commercial One Brokers in Branson, MO. Dive in for our advice on how to get into commercial real estate for new investors.

Jump to: 

1. Why are you investing?
2. Types of commercial real estate
3. Prepare your financials 
4. Avoid lowball offers 
5. Hire a property manager
6. Work with a commercial broker

1. Define Why You’re Investing 

It may seem silly, but your “why” is essential. Why are you investing? Why commercial real estate? Why now? 

You need to know what your end goal is. What do you hope to accomplish by investing in commercial real estate? Once you know your “why,” you can determine what type of properties will help you get there. 

Are you investing to shelter income and maximize tax benefits? Are you primarily interested in additional cash flow? Do you have a longer-term investment horizon and want “free and clear” properties at retirement? Do you wish to build wealth for your heirs?

As you build and diversify your CRE portfolio, remember your initial reason for investing and let it guide your decisions. It will give you direction and help you avoid investment options that don’t fit. 

2. Learn About Types of CRE  

Buying commercial real estate is different than buying a residential home. You can buy and sell quickly or lease to a business for profit. First-time CRE investors should learn about the types of commercial real estate. 

When you’re just getting started, invest in what interests you and what matches your “why.” 

What Are Some Commercial Property Types?

Office  

The condition of an office space affects the types of tenants you’ll attract. Offices are categorized by “classes.” Each class reflects the age and state of the property. 

• Class A properties are premier spaces with higher rents and new finishes. Tenants that must impress clients and customers will look for Class A spaces. 
• Class B office spaces fall in the middle range of conditions. They are older buildings that, while aging, are still in fair condition. These spaces have fewer amenities than Class A properties. 
• Class C office buildings are best when function is your primary need—like startup businesses. These spaces are over 20 years old and may be in less desirable areas. 

Depending on the area, office buildings may center around a business district or a prominent part of the city. In big cities, office spaces tend to go up with skyscrapers. 

Larger companies may opt for a suburban location instead, where they can build or occupy several buildings and maintain unique amenities like private parking lots or gardens. 

Another thing to consider with office tenants: Are these companies requiring their work force to return to the office, or will they work remotely? They may use their office space differently than in the past. 

Retail & Restaurant 

You’ll lease to businesses that sell goods or services. Think shopping centers and malls. Retail properties and restaurants are often highly visible to bring in traffic. 

The local economy and customer demographics are big considerations when buying and leasing retail properties.

• Neighborhood centers include grocery stores, drug stores and other retailers.
• Shopping centers offer many goods and services, including clothing, food, electronics and home decor.
• Power centers have large anchor tenants: national brands, home improvement stores or warehouse club stores. Power centers can be 250,000 to 600,000 square feet, and restaurants, fast-food options and banks often pad them. 
• Community retail centers are smaller than power centers. They are home to various tenants and feature convenience items or general goods.
• Mixed-use properties include a blend of spaces. Retail is often on the ground floor, while office or living quarters make up the remainder of the building. 

Industrial 

Warehouses, factories, and distribution centers fall under the category of industrial property. These properties are outfitted to meet the needs of manufacturing plants or logistics centers. 

• Light assembly spaces might be distribution centers or used as company storage space.
• Flex warehouses have features of both an office and a warehouse. In these spaces, tenants can store or assemble goods and display products to customers or bring customers in for services. 
• Bulk warehouses are large spaces used as distribution hubs for national companies.

Tip: Start With One Type

Our advice? As a beginning investor, you should zero in on one type of commercial real estate at a time. 

Choose the property type that interests you. Learn about how the businesses using your properties operate. Once you’ve learned what you can, you can start investing in other property types. 

3. Prep Financials & Business Plan

Before talking to a property owner, you should know your budget and have your financial plan ready. Determining how you will pay for the property first shows you are serious. Will you take out a commercial real estate loan? Will you pay in cash up front? Have a plan and decide what your limits are. 

Applying for financing first saves you time. It also sweetens the deal for the seller. If you get pre-approved for financing, you can show the property owner that you mean business and have already secured the means to back your offer. That tells the seller that you can close the deal quickly. 

It is beneficial to have a good CPA who knows your financial situation and can help guide you with what you can accomplish. 

During the loan underwriting process, lenders will analyze your cash flow statements, credit history and net worth before approving you for financing. Be sure to have the necessary documents and statements available. 

You won’t get approved without a business plan! Lenders need to feel confident that you have a plan in place to pay back the loan. Think through how you will use the property and project your return on the investment. Share your business plan with the lender. 

4. Don’t Make Lowball Offers 

You can’t always get everything you want. The seller has to profit or find benefit in the transaction, too! Don’t show off your inexperience—or insult the opposite party—with a lowball offer. 

New investors often make offers that are too low when combined with their terms for the deal. When you propose an offer, remember that you can have one of two options:

1. Buy at your price with their terms OR
2. Buy at their price with your terms.

Do your research on market prices for similar properties. Then, be ready to compromise. You may have to give a little up if you’re asking for specifics and want a certain price. It’s a negotiation, after all. 

Remember, net operating income (NOI) will play a key part in determining the value of the property. It will also dictate the financing terms and conditions from your lender. 

5. Hire a Property Manager

Managing tenants can be a full-time job. If you plan to lease the property you buy, you need someone to take care of the day-to-day. 

Hiring a property management company takes the burden off of you. You’ll focus on your day job or building your portfolio while the management team ensures everything with your property runs smoothly. 

A property management team offers many services. They’ll act on your behalf to maintain the property and respond to tenant emergencies. Property managers handle tenant communications, collect rents, hire maintenance professionals, and solve problems that arise. 

If the property is smaller, you may need to manage it yourself for a time while you build your portfolio. The downside to self-management is that it’s hard to give your tenants bad news. Owner/managers tend to get talked into lower rents, and they aren’t as forceful with collections. Many may agree to fix items on the properties that should be the tenants’ responsibilities. 

Commercial One Brokers’ sister company, Maple Properties Of Branson, offers property management services. We’ll take care of your commercial property 100% or on an on-call basis. Whatever you need, we’re here to help! 

6. Work With a CRE Broker 

We all get by with a little help from our friends. Why not do more than get by with help from a commercial real estate broker? Be confident when you invest in commercial real estate with an experienced professional by your side. 

Of our commercial property investment tips, this one is the biggest! When you work with a broker, you unlock a wealth of market knowledge and experience. You’ll find a commercial property that suits your goals and budget—and you won’t have to do it alone. 

Brokers help you find property, negotiate with the seller, obtain financing and understand the risks and benefits of commercial real estate.  

Are you ready to start looking? Let’s get you your first investment property. 

Talk to our team at Commercial One Brokers. We help you find investment commercial property for sale in the Branson, MO area. 

…

Article written by Steve Critchfield, CCIM, of Commercial One Brokers. Steve has more than 36 years of experience in commercial and investment real estate. He is active in many Branson, MO organizations, including The Branson Lakes Chamber & CVB, The Tri-Lakes Board of REALTORS and the Taney County Partnership, to name a few. 

Find Steve on LinkedIn.