The Office, Industrial and Hotel Commercial Real Estate

November 5th, 2013 by Diane Moore

 The commercial real estate industry is one of the largest in Los Angeles, Beverly Hills, West Hollywood, Culver City, Sherman Oaks, Santa Monica, Tarzana and Studio City employing millions of people in a wide variety of jobs. Of course, there are commercial real estate salespeople, brokers, and agents whose job is to bring sellers and buyers together. But there’re many others involved as well: appraisers, inspectors and lawyers, for example.

Commercial Real Estate

Commercial Real Estate

There’re also architects and builders, developers, mortgage brokers, and lending institutions. Even commercial real estate agents and brokers have begun to specialize, creating new positions in the profession: buyer’s brokers and transactional brokers.

 

The real estate business helps companies and individuals buy, lease, sell, evaluate, and manage property. People usually have the idea that commercial real estate brokers are only concerned with buying and selling condominiums and homes. And they are right at-least up to some point. Real estate agents help others buy and sell agricultural, residential, industrial, and commercial properties; lease and manage shopping centers, apartment buildings, and office buildings; oversee properties on behalf of pension funds, publicly traded real estate companies, and banks, and evaluate properties for banks, insurance companies, and individuals.

 

Commercial real estate brokers come in two flavors: those you cannot work with and those you can work with. Of course, you need to find an agent that you can with, someone whom you can create some good chemistry with and most importantly, someone who can bring you a ready stream of properties to check and make offers on.

 

The commercial real estate industry offers a wide variety of opportunities to women and men of all backgrounds and ages. Real estate sales agents and brokers must be licensed by the government in which they work.

 

Commercial real estate covers a wide variety of structure types and uses, as well as empty land. Learn specifics about some of the most popular ones here.

 

Office complexes and office buildings

 

An office is typically a room where administrative work is done; it can also denote an area within an organization with certain duties attached to it.

 

A single building designed for a group of offices, or for office use in a cluster of buildings or in a single building would fall into this class. Office buildings can be single or multi storey buildings. In the current business universe, especially in Los Angeles, Beverly Hills, West Hollywood, Culver City, Sherman Oaks, Santa Monica, Tarzana and Studio City etc. office buildings that lack elevators such as the two storey buildings are slowly being wiped out because many service businesses might also have customers that are physically challenged and therefore cannot walk up the stairs.

 

 

Just like the shopping centers or the retail centers, office buildings can accommodate several tenants or just one tenant. In Los Angeles, single tenant office buildings are usually used as corporate headquarters of big companies. Even though such tenants are often high quality tenants who pay their rents on time and also sign long term lease contract, single tenant office buildings can be relatively sensitive to the economy because it might be difficult to get a single tenant to occupy the whole building.

 

On the other hand, multi tenant office buildings are very steady investments in Beverly Hills, Culver City, Sherman Oaks, Tarzana and Studio City. This is because such office buildings are leased by small businesses like real estate accountants and real estate brokers. Thus, multi tenant office buildings are a perfect investments opportunity in the commercial real estate industry especially for investors who want to spread out their investment risk. Investors derive income from the rental payments of the office tenants.

 

Offices can be of various categories including sub urban high rise offices, central business district (CBD) offices, and sub urban garden offices. Potential office complexes can be incredibly sensitive about the location. The office building should be easily accessible and situated on or nearby a main road.

 

The Los Angeles Office Real Estate Act has two core components: enforcement and licensing. Both enforcement and licensing functions are required by the federal government organization, which oversees all state real estate licensing agencies.

 

It can be said that the design of a real estate office today should be focused on the areas of the business that produce the listings, money, and commissions. In most cases, this will be from property management and or from sales. The best commercial real estate agencies today are those that offer specialist property management services, leasing, and sales.

 

Special regards need to be given to the customers that you have visiting your office as well as the types of businesses that they do with you. The customers that you serve are the most important people in office design considerations. For this reason, special places within the office need to be created to allow business to occur successfully and privately. When you are dealing with tough negotiations or with difficult clients, privacy is very vital.

 

Hotels

 

Hotels are generally characterized as a full service or limited service. Limited service hotels are further grouped into mid scale, economy, extended stay, and budget hotels. Full service hotels are further grouped into luxury, mid scale, and upscale hotels. When thinking about investing in hotels commercial real estate, it’s very important that the property be in a very steady operational history in order to earn the trust of customers.

 

Thus, a hotel building with a steady history of about five years should be perfectly inspected. The least occupancy for hotels should be approximately 60 percent. Furthermore, lenders in the present commercial real estate market have a preference for franchise affiliated hotel buildings that have franchise arrangements that extend past the period of the proposed loans.

 

Purchasing a motel or a hotel is like a double -edged sword since you will buy the real estate property and also a 24/7 business. It’s important for every investor who is willing and ready to invest in hotel real estate to understand that this business needs hard work and strong marketing skills in order to get hotel rooms filled because the rooms are of no value when they are empty.

 

There are also investors who have a preference of investing in brand names such as Burger King, KFC, or pizza which are more inclined towards the restaurant part of commercial real estate investment. Usually, there’re single tenant properties which do not need any management skills from the landlord or the owner. However, the rental income or the cap rate for these restaurants or hotels is normally in the range of 5 percent to 7 percent.

 

Emerging restaurant and regional hotels brand names such as Tia, TexMex, Zaxby’s and Carino’s are offering higher rental income ranging from 7 percent to 8.5 percent. In order to make sure that they make profits, restaurant operators normally sell the real estate to other willing investors at a higher cap rate and then lease back the property for durations ranging between 20 years and 30 years. The sales profits they receive are mainly used in the growth of their business mainly by building more restaurants. Thus, hotel real estate investors who are willing to higher risk enjoy the return of high income from these hotels that are now emerging at a very high rate.

 

Quietly hotels edge back into good turn and cannot be ignored. They have been in the rocket mode. Expect proceeds growth to flatten in the healthy mid to high single digits as long as growth remains sedated. The investment opportunity presented by hotels is unprecedented. In fact, most new properties sell out in the pre construction phase. In doing so, real estate investors are able to get lower prices, secure many of the best units and gain appreciation on their savings before ground is even broken.

 

Industrial

 
Given the present condition of the commercial real estate market, there is a great opportunity for people who have the capital to acquire industrial properties well below market pricing.

 

With this in mind, it’s vital to follow the old saying in any type of commercial real estate keep the next buyer in mind when buying the real estate property’. In simple terms, make sure that the features of the property will be attractive to as many potential clients as possible. Knowing that this property is there to boost your business, you can’t meet every potential client’s needs, but here is a list of vital features that are extremely important to most industrial real estate buyers in Los Angeles, Beverly Hills, West Hollywood, Culver City, Sherman Oaks, Santa Monica, Tarzan and Studio City.
 

 

Location

 
This golden commercial real estate rule still holds and even much more to industrial real estate. Having a facility close to expressways is very important for you and the next user in keeping their logistics and transportation down. Having a facility in an appropriate place can make a major impact on a business’s ability to compete especially when fuel prices goes up. For distribution centers, fuel costs and labor can account for 50 percent of the total costs of running a facility according to logistic industry professions.
 

Clear Height

 
Clear height refers to the highest height in a facility before you come across the piping, joists, or anything else suspending from the ceiling. Basically, clear height on new facilities is around 2’ to 3’ below the roof’s deck. Conventional production facilities usually have lower clear heights when compared to the newer distribution/warehouse centers. Traditional production facilities’ clear heights can range from 12’ to 24’ feet while newer distribution/warehouse centers built in the last 8 to 10 years can range from 30’ to 32’ feet on average.

 

Docking

 
There’re two types of docks that a facility could have’ internal and external:

 

  • Internal docks. Internal docks allow way for trucks to drive into the dock area, and the dock doors can be also be closed thus shielding the manufactured goods from the elements. The main disadvantage for internal docks is that you or your next customer will be paying for the square footage in the dock area in buying price, real estate taxes and operating expenses.

 

  • External docks. External docks have their dock doors flush with the buildings outdoor walls and trucks can back-right up to the building. The doors are usually sealed in a way that cold or hot air cannot enter the building. External docks have become the standard requirement for buildings built today thus reducing the extra costs of internal docks.

 

Newer buildings usually have one dock per 10,000 square feet of area, and new large facilities can have as many as one dock per 6,000 square feet of space.
 

Land

 
Clearly the more land with commercial property, the better. 3 main areas land around the commercial property can be utilized for:

 

Car parking

 

Car parking will be particularly vital to manufacturing companies who basically have more workers than a distribution center. Basically, newer distribution facilities will not have as good of a parking space than older production centers.

 

Trailer storage

 

Imports to Los Angeles are increasing rapidly, and the need for shipping container storage is becoming a critical issue. Communities are beginning to push-back on this matter limiting shipping/trailer containers in their communities, which they see as an eyesore. It’s vital to check with the local authorities to understand the rules and laws pertaining to this to ensure that the limitations are well understood.

Outside storage- Outside storage ties in with shipping/trailer container storage issue. There is a high demand for outside storage from both manufacturing and distribution facilities.

 

Final Thoughts

 

When hoping to invest in office, hotels or industrial real estate property particularly in the present economic conditions, there’re various factors and options that must be considered in order to make sure that your investments is successful and that it really pays off. These factors have a great impact on the productivity and the prosperity of your investment. For example, in places where the need for profitable space is very much high, availability and price may differ according to the location and size of the building. Some businesses and organizations may find it very beneficial to build a facility away from their competitors as a good way to stand out as well as create a new customer base by expanding into new markets.
 
Finding a good place to establish a successful business is vital. Businesses such as hotels, restaurants, and offices are looking for urban spaces to centralize all their operations. Therefore, they invest in areas with business and a market that is easily accessible. Alternatively, manufacturers and industrial companies prefer operating in rural places where there is enough space to fit their business model.

 

 

Diane is a highly-qualified translator of the English, Italian and Spanish languages. She has studied extensively in Italy and Switzerland. She writes about a variety of financial services industries including insurance. She has a love of life and a curiosity that drives her both personally and professionally.

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