Real Estate: 4 Challenges to Selling a Commercial Property

Buying a commercial building is hard work. Remember the time you invested in researching and evaluating properties, negotiating the terms, and closing the sale? Compared to buying, selling commercial property must be easier. Just spruce up, gather paperwork, list, and wait for the offers, right?

No! Selling involves as much work as buying commercial real estate. Why is selling an investment property challenging?

Photo by Philipp Birmes on Pexels.com

Marketing 

Real estate transactions are about matching the right property to the right buyer. It sounds simple, but an already small buyer pool shrinks when accounting for property type, class, pricing, and location.

Buyers acquire commercial real estate for specific reasons, like pinpointing income-producing properties or to add a diverse tenant mix to an investment portfolio. Sometimes buyers find the building specifications match their criteria, but they fail to secure adequate funding. 

Part of successfully connecting with the right buyer is generating an “ideal buyer” profile and creating a marketing strategy aimed to find that person(s). Target where that buyer operates on social and listing platforms.

Having the best marketing materials available is critical. Considering 360 photography, drone videography, virtual tours, and other tools to showcase CRE in the best light. Hire the right real estate agent or broker familiar with your market who knows which strategies will work to find the ideal buyer for your asset type. 

Information Gathering

Recall all that property data you wanted to know as a buyer before presenting an offer? Now the tables are flipped and it’s your turn to gather the necessary data that accompanies a commercial real estate sale.

Since most commercial buildings tend to remain with the owners for an extended time, it may have been a while since you purchased the building. Various factors may have changed in the real estate market since your purchase that impact everything from building’s use to its marketing to its pricing. These factors could be changes the area’s zoning, the local neighborhood undergoing redevelopment, or a new, similar building offers tenants better amenities.

Conducting due diligence about the market and your competition takes time.

New Interests

Trends change. The building features that attracted you to buy may no longer be what’s hot in your submarket.

Businesses, retailers, medical professionals, and industrial companies have different needs from 10 and 20 years ago. What technological infrastructure exists in the building and what companies service the property? A high-speed internet connection able to handle large loads is a priority for many businesses. You may need to consider some upgrades to get your building up with the times.

In our new remote workforce, the trend is downsizing. Why pay for a big office meeting room when it sits empty most of the time? A shared meeting space is an attractive amenity in an office building.

Economics

Changing economics is the most challenging aspect of selling commercial real estate. An area that was booming five years ago may no longer be a hot commodity. Submarkets change based on supply and demand. For example, the pandemic pushed an already struggling retail industry over the cliff as e-commerce chowed into sales. Meanwhile, the demand for last-mile delivery centers skyrocketed in urban areas.

Luckily, sellers can take steps to improve the chances of finding the best investors in a timely manner. Our ebook what sellers need to do to prepare a property to sell. Learn more about due diligence, making the building more attractive, and plans for after the sale. 

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