Comercial, office space too big

2 Replies

Hello, I currently own 2 rentals in Tyler TX, I have had bad experiences with residential rentals and am trying to move to commercial RE (no multifamily), I have a good opportunity but since it is my first acquisition I am trying to avoid making a mistake. The property is new, located in a very good zone and in pretty good shape, the only problem I see is that the offices are huge; there are two bathrooms (70 and 80 SQFT), 245, 385, 355 and 185 SQFT offices, 150 SQFT waiting area and about 130 SQFT of halls. 1750 SQFT total. The offices are really big, I just cannot think of a business that would use so much space for offices. I am afraid that I will buy it and stay vacant because is so big (It will rent at about $30,000 per year and renter is responsible of NNN,or at least is what the realtor estimated). The realtor said that the intention was be used as Medical. Anyone in this forum has experience with this? It looks to me that is a good deal (330K in one of the best zones in town).

Any help will be appreciated.

Your broker/agent needs to determine the spaces highest and best use which may or may not be the way the interior space and exterior is currently laid out and designed.

The question then becomes can you convert and invest the cash to the highest and best use and still make a good profit all costs considered?

If the funds aren't there to justify the change then you look at the next use that makes economical sense and is allowed with zoning. You need to see saturation levels for the area for the product type retail, medical,etc. you are thinking of. I am not big on regular office because in down cycles people go to running the office out of their home or move to cheaper warehouse space for rent per sq ft.

You could put the property under contract with a long due diligence if seller will allow it for little to no non-refundable earnest money. In this way you can control the rights to the property and approach tenants to negotiate an LOI and then execute a lease before closing on the property/

If area is good generally demand is there unless developers are slamming up so much product there is an oversupply to demand.

Joel,

I appreciate your answer, The intend of this office complex is medical offices, there is a Chiropractor next door and a dentist in front of the property. I will follow your advice and ask for two or three months of property rights to see if it rents. When do you think is the best time to rent Commercial, I know that residential is hard to rent from November to February, is commercial the same? I can close next month or in two months, I already have the loan approved.

Thanks!