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What are the fundamentals of commercial real estate?

What are the fundamentals of commercial real estate?

Commercial real estate, unlike residential real estate, is the name given to a piece of land leased out primarily for business. The property serves as a workspace for anything from a mall, to a restaurant.

The primary purpose of commercial real estate, as the name suggests, is commerce. When talking about commercial real estate, one may hear words like investors and leases often. Read below to find out what exactly these terms mean and how commercial real estate differs from residential real estate.

How do investors come into the picture?

There are two very common possibilities when it comes to commercial real estate. In one scenario, the business may itself own the property and building which it uses as a workspace. The other possibility, however, is that a third party may own the building or property which is used by multiple businesses. These investors can then collect money from the businesses as rent.

Leases in Commercial Real Estate

Commercial real estate leases usually vary between one year and ten years, since the space required by offices generally averages between this duration. Since a lease typically transfers property and services to another person for the set duration, long-term leases are preferred by most companies to avoid the paperwork repeatedly.

Short term leases may provide people with increased flexibility for the adjustment of lease rents. The advantage of long-term leases, however, is that they grant more security to the property owner especially when the transfer was done on credit. Another key distinguishing factor between residential real estate leases and commercial leases is that for commercial leases, the price quoted is usually in annual rental dollars per square foot.

How is commercial real estate different?

Residential real estate is usually focused on the requirements of a single family. However, you are free to experiment more with commercial real estate. Since commercial buildings can cater to a variety of businesses, there are increased options. There is also less competition in the commercial real estate market when compared to residential real estate.

What are the fundamentals of commercial real estate?

To learn more about commercial real estate in London, Ontario, contact Nav Sidhu.