Before listing for sale your commercial real estate property, it would be wise to:
1. clearly understand the current performance of the asset type you hold (e.g. office buildings in Toronto) and the economic conditions faced by the buyers who will be targeted (capital markets, interest rates, economic growth forecast in the niche the buyer and current tenants are operating in), as these impact the property’s value and buyer demand
2. obtain an accurate valuation (a professional appraisal can help you set the asking price) and a comparable sales analysis (a review of recent similar sales, off market and on the market, in the area to assess market expectations and competition)
3. enhance the property’s condition (via minor renovations or upgrades such as updating common areas or improving energy efficiency) and its curb appeal (via exterior improvements that can include landscaping, signage, and facade enhancements) to create a positive first impression and increase its value
4. secure long-term leases with reputable tenants (stable income can significantly increase a property’s attractiveness and value to buyers)
5. ask the commercial real estate broker whose services you will be using to: (i) highlight the property’s Unique Value Proposition (i.e., the unique features of the property, such as location advantages, historical significance, or future development potential); (ii) employ professional marketing materials (high-quality photos, 3D walk-throughs and videos in order to showcase the best features of the property) and that the marketing efforts target the right audience (e.g., investors, developers, or business owners looking for commercial space), and (iii) ensure that a competitive list price is set based on market analysis and property appraisal (overpricing can deter potential buyers, while underpricing may leave money on the table)
6. ask your commercial real estate lawyer to ensure that all legal and regulatory compliance considerations are addressed (zoning by-laws, building code, environmental regulations, etc.) and be proactive in disclosing any issues or potential liabilities with the property
7. ask your financial advisor to help you ensure that the sale transaction is structured efficiently from a taxation perspective, as well as what vendor take back mortgage scenarios would be feasible (if needed by the buyer) given that the availability of such financing can positively influence the sale price
Is there anything else you’d like to add to this list of key considerations for commercial property sellers?