Commercial Real Estate Investments: 9 Factors To Consider

Regardless of whether it is for end-use or just investment, some crucial elements must be taken into consideration when investing in commercial property.

Share on facebook
Share on twitter
Share on linkedin
Commercial Real Estate Investments: 9 Factors To Consider

A commercial piece of real estate (CRE) is anything utilized for business purposes, such as offices, data centers, warehouses, or retail spaces like shopping malls. It can also include industrial, institutional, or institutional real estate. There are more prospects for rent and price appreciation in this segment than in others. In recent years, India has seen a rise in the demand for and sale of commercial space, and in 2019, India’s top eight cities achieved the highest-ever net absorption of 47 million sq. ft. of office space. Expectations for this asset class were high for 2020 as well, but sales of commercial buildings have been hampered since the outbreak in March of this year. It is now projected that the CRE segment would see a comeback as the economy goes forward towards recovery, which brings us to the question: what are the main aspects to assess before investing in commercial real estate?

Also Read: Commercial Real Estate Metrics and its Value- A Manual to Wealth

Factors to consider while investing in Commercial Real Estate Opportunities?

Any investor may find commercial real estate an enticing investment opportunity. It allows you to gain access to a new market and expand your business horizons. Commercial real estate, on the other hand, is a unique animal that necessitates a few more considerations above residential real estate.

Also Read: Invest In Commercial Real Estate without Buying Property

With these transactions, patience is a virtue because the sales cycle is longer and an investor must be constantly on the lookout for changes in market demand. Commercial real estate, on the other hand, appears to be a good option for agents trying to expand their firm in 2021. Some factors to consider include:

  • Identify the Correct Location

Before making a commercial property investment, keep in mind that choosing the right location is critical since it assures acceptable rental returns while reducing the danger of a capital loss. Furthermore, if the location is ideal, it will be easier to find a tenant and banks will be more willing to grant loans. To avoid investing in a company located in a region that is undergoing a downturn, the investor must consider the demographics and tendencies of the area. In this situation, market research and analysis are critical to determining how well a property will function in a specific region. Before spending money, talk to local brokers and agents who are familiar with the area’s advantages and disadvantages.

  • Acquire an understanding of current market conditions

Before investing, you should examine the performance of each asset class to see whether that sector is a viable investment opportunity, and then decide which type of property you want to purchase. The market is always shifting to keep up with the latest fashions. Consider the influence of e-commerce on landlords and customer demand, for example, if you’re considering a retail investment.

People queued up in front of their PCs to buy products online because malls were closed as a result of the pandemic. People are still reluctant to leave their homes, even when new physical retail locations open. This implies that the demand for retail properties has fallen and will likely take some time to recover before it reaches pre-crisis levels again. In the meantime, as more people use online streaming services and work from home, the need for industrial facilities like warehouses, factories, and data centers has grown. These spaces are in high demand right now.

Also Read: Commercial Real Estate Trends and Insights

  • Make Time for Research

A prospective buyer must spend time performing thorough research about the investment option before making a selection. They should go through all the legal documents and documentation, along with conducting a property survey and an inspection along with researching about the connected financial aspects before concluding. While it is normal for investors to become enamored with a particular property, investors should not let their excitement cloud their judgment and instead conduct a thorough study before investing.

Also Read: Commercial Real Estate ROI

  • Documentation

A high-level legal authority should carefully scrutinize all title associated documents, permissions, planning permits, taxes, utility bills, etc. as part of the due diligence process. If the property is held, the contract should be well understood, notably the agreement/obligations of the landlord. This would assure that in the future there would be no shocks. The presence of mortgages secured against the property would be very important to check.

  • Amenities

Although the availability of amenities in a building could attribute a certain premium, the advantages tend to exceed costs. Car parking stalls (which no longer considered amenity) should correspond to the amount of space rented by local rules and should be attempted by the buyer to obtain more stalls, as this would be a large distinguishing factor from comparable possibilities. The presence of facilities would surely increase the marketability of the space, like a food court/essential retail on a huge campus, and would be a good idea for investment in such possibilities.

  • Property Assessment Status

The first step in evaluating the state of the property is to take a simple walk or take our property. You want to see the building and the internal amenities such as the furniture changes in the first place. You will wish to enter the due diligence process in the next steps, which includes an examination of property condition records, zoning documents, financial documents, environmental evaluations, and more.

  • Long-life leases for tenant underwriters

The tenants should be checked so carefully that you check the conditions of the property. Looking at the renters, they examine how long they stay, the rent they pay, and whether their demand is jeopardized. The term of a lease for a tenant provides insight into its stability and success. A long-term tenant has a documented history of “fitness” and steady income. Look for leasing choices in addition to the tenancy length. A renewal tenant is crucial because it displays a constant trust in the success of the tenant by the existing landlord.

Compliance with the cost of tenant renting can tell you whether tenants are overpaid, underpaid, or if rentals are worthwhile on the market. If the rent is low, this will help you to improve your rents and increase your net income in the future.  Vice versa, if current occupants overpay their rent, the tenants can move around and leave the room. 

When the space is vacant, in the future, you may have to rent cheaper to fill space quickly. The key issue is the demand of the tenant in the market. As already mentioned, the market is still being disrupted by Amazon and other e-commerce.

  • Evaluation of risk by kind of property

In comparison with residential properties, the risk assessment is significantly different in commercial terms and varies greatly by kind of property. The success of two residential homes close to one other is often similar, whereas commercial buildings in a similar situation may fluctuate independently, thus the range of risks involved in your potential investment is crucial to understand.

  • Avoid business failure or business models

You have to consider that your tenants will default on their leases if there are restaurants, grocery stores, pubs, or business models that are shifting online and that you have to plan your insurance properly to ensure you are covered if this happens. Search for companies that are failing and do your best to avoid doing so since a golden parachute may not always occur.

Modern investors are interested in investing in commercial real estate. Educating yourself on the important details of a property is essential for a successful commercial real estate investment. Before investing in Commercial Real Estate, it is critical to investigate the various intricate factors related to the potential property. Learning the essential facts and exercising caution when investing ensures the success of your commercial real estate investment venture.

While investment in commercial property surely improves one’s total portfolio of investment, it should not be rushed to do so for fear of losing an offer. Thorough market analysis with the help of a professional real estate consultant should be carried out, taking account of the above-mentioned factors. Even if this process finally takes longer, it’s worth it.

At Assetmonk, an investor has access to some high-demand areas of CRE such as livelihoods, residential properties, and business property. Thorough diligence is exercised to list all possible assets for the investors, to study all potential assets and the main areas of major metropolitan cities covered by the company’s Asset List. At Assetmonk, the company offers both high-equity assets and regular rentals.


The six most prevalent means of evaluating the worth of a commercial investment opportunity include a cost approach, a sell-by-payment strategy, revenue capitalization approach, gross rent value multiplier, door value, and cost per profitable square foot.

Location of property, property valuation, investment in and investment horizons, expected cash flows and profits, leverage and ancient buildings, taxation, etc., are some of the significant elements you should examine when you buy property for the sake of investment.

Commercial properties usually include retail properties, industrial buildings, offices, warehouses, mixed properties, and apartments. To find out whether a property is a positive investment opportunity, deduce a cash flow, value-added, appreciation, holding period, etc.

Related Articles

istockphoto 1439112216 612x612 1

EPF Form 31 – Partial Withdrawal

EPF Form 31 is used by employees to register claims for a fractional withdrawal of money from the EPF. Employees’ Provident Fund is a savings scheme backed by the govt. that can help employed persons establish a substantial corpus to satisfy their financial obligations after retiring. Employees are expected to deposit a percentage of their basic salary (12 percent) per month to this type of PF. The employer then makes a matching contribution to this investment. The corpus for workers is generated by pooling these deposits with relevant government interest. Employees might also opt to pull from their EPF savings throughout their job tenure to pay any unexpected bills that may occur. Also, read EPF Form 11. When can you withdraw your EPF funds?  An individual can withdraw his EPF money in part or in full via EPF withdrawal Form 31 only under particular conditions. Employees are eligible for withdrawal of their whole EPF savings amount in the events listed…

Read more
istockphoto 1200759231 612x612 1

EPF Passbook Download

Employees can download EPF Passbook online. Employee provident Fund Organisation offers an EPF passbook service online. It functions similarly to a passbook of a bank in that it records an individual’s EPF account spending. It allows one to easily see, import, and print their account statement. This online EPFO member passbook may also be accessed via the program. But, prior to installing the EPFO passbook, the UAN passbook must be unlocked. So, the EPF passbook is a database that contains a record of all contributions made to EPS and EPF accounts by the worker and the employer. The passbook details all contributions made each month. Interests earned in the account of the beneficiary are still kept in the passbook. Read EPF – Employees’ Provident Fund, EPFO Benefits & Process. Information in the EPF Passbook The company’s or employer’s name The ID of the establishment  The type and name of the EPFO office Contributions from both the employer and the employee…

Read more
istockphoto 1353920585 612x612 1

PF Form 19

The Employees’ Provident Funds and Miscellaneous Provisions Act of 1952 requires a worker to pay a set compensation payment to the PF account, and an employer must contribute an equivalent amount. Withdrawals under this program need to complete several forms, one of which is PF Form 19. Read EPF Withdrawal: How to Fill PF Form & Get Claim Online. PF Form 19 Is? Whenever a subscriber wishes to finalize his PF account, PF Form 19 must be completed. This only applies to workers without a UAN or Universal Account Number. So, it is possible to fill even if one does not possess a Universal Account Number, and an employee will only have to provide his PF account number. PF Form 19  will be utilized to request a settlement that is final of the PF account or to withdraw pension payments. A variety of PF Forms are accessible, each having a particular function. To achieve the intended result, these forms must…

Read more
National Pension Scheme tier 1 account

National Pension Scheme Tier 1

The National Pension Scheme Tier-1 Account represents the most fundamental type of pension fund account provided by GOI.  The govt plan aims to meet the retirement demands of private and public sector workers. To provide a framework for the use of NPS, the govt has divided it into two separate tiers: Tier 1 & Tier 2. The National Pension Program (NPS) is a national pension scheme that attempts to meet employees’ retirement needs in private and public industries. Read NPS Vs PPF: Comparison, Return Rates & Which is Better. Tier 1 NPS Account Aspects The following are a few major features of the Tier 1 NPS Account that distinguish it from the NPS Tier 2 account. Tier 1 NPS Account constitutes the most fundamental type of pension account. Early withdrawals from the Tier 1 NPS Account are permitted, but only like reimbursable advances and only after the investor has served for fifteen years. These withdrawals are permitted only in an…

Read more
password reset

UAN Password reset

As all Employee Provident Fund activities are being done online, the UAN, or Universal Account Number, is now the only ticket to operating the online EPF platform. With the advent of UAN, activities such as PF withdrawal, monitoring PF balance, applying for loans against PF, and so on have become much easier and more accessible to individuals. Furthermore, the UAN stays constant and transferable across an employee’s career. Employees must have membership IDs, that are eventually connected to the employee’s UAN, even if they change employers. Given the gravity of the situation, you must not lose your UAN and passwords. But, if you continue to lose or forget your UAN Password, follow the instructions below to generate it. Read EPF – Employees’ Provident Fund, EPFO Benefits & Process. But what if you forget your UAN Password? To restore or modify your UAN password, abide by the rules below: Open the EPF online portal. On the webpage, on the right-hand side,…

Read more
Customer care support

NPS Customer Care

The National Securities Depository Limited Central Record Keeping Agency or NSDL CRA (NPS Customer Care) may be reached @ (022) 2499 3499. One can also lodge any complaint electronically with the NSDL CRA’s Central Grievance Management System (CGMS) or with Karvy CRA. In the NPS, NSDL and Karvy are Central Recordkeeping Agencies (CRAs). NSDL’s location is 1st Floor, Times Tower, kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai – 400 013 and Fax Number: (022) 2495 2594/ 2499 4974. The details for NPS grievance escalation are shown below. If one is dissatisfied with the settlement offered by NSDL/Karvy, one may submit a complaint directly to the watchdog, the Pension Funds Development and Regulatory Authority (PFRDA). Do not miss NPS Vs PPF: Comparison, Return Rates & Which is Better. NPS Grievances Escalation Level Level I Escalation  Official’s Name Mr. Chandrashekhar Warange Details For Contact  Tel Number: 022 24993499 Email: Position Grievance Redressal Officer (GRO) Level II Escalation Official’s Name…

Read more