By: Curtis Gabhart, CCIM
Here is a quick recap of some things I look for when doing a quick inspection of an apartment building or even a single family home and common issues I come across.
I like to do a quick review to the outside condition of the property in order to gain insight as to whether it warrants further consideration for purchase or investment.
Now, before getting into the details, let me summarize the most important factors regarding the physical condition of a property.
Some of the important visible considerations are:
- Reviewing the foundation and cement
- Checking the siding
- Reviewing the sprinkler systems
- Analyzing the quality of the landscaping
- Looking at the windows
- Looking at the roof
- Inspecting at the front door
- Looking at the gas meters
- Looking at the train gutters
- Reviewing the quality of the paint
- Looking at the overall neighborhood
When buying a property, whether it’s an apartment building or single-family house that you may plan on flipping, some of the concepts are going to be very similar, if not identical. With many investment properties, you will find an inside inspection is subject to an accepted offer. This means you will need to make some assumptions about the property before you submit your offer. This can prove difficult, especially when you’re not able to view the inside.
I’ll look from the ground up – I’ll start by looking at the ground and taking an overall look at the condition of the property to see what level of care has been maintained. As a general rule, if it’s a piece of shit on the outside, it’s probably a piece of shit on the inside. There have been a few exceptions where I’ve been pleasantly surprised when I got inside a property, but that’s exactly what they are – exceptions. I’d use this analogy as a general rule of thumb – if you see a car that looks junky on the outside, it probably just as junky on the inside.
Foundation – I’ll look at the foundation, all the cement on the ground near the foundation, and all landscaping near the foundation. I’m looking for things like sprinklers spraying on the building. I’ll then check if there is stucco peeling off the building, which can sometimes indicate moisture intrusion into the building. I’ll also check if the ground is sloping towards or away from the building; it should be sloping away from the building. If it’s sloping towards the building, it may indicate that a possibility of having a foundation or other problem that relates to water. If there’s cement, I’ll look for big cracks in the cement, which sometimes can indicate unstable soil or cracks in the foundation.
This could indicate further foundation issues
Landscaping – what is it going to cost me to improve the landscaping, what do I need to do to it, are there sprinkler systems, and are they automatic or non-automatic?
Building – what kind of siding is there? Is it stucco, brick, vinyl, wood? I pay close attention to the condition that it is in. If it’s wood, I will check for visible water or termite damage.
Eaves – Does the wood going into the eaves have damage? If there’s a lot of damage in the eaves, it very well could go into the attic rafters, which could be a lot more expensive. If it’s on the siding, what kind of siding is it? If it’s an old building, a lot of times replacing siding can get very expensive for two reasons:
the eaves is the part of the roof that meets or overhangs the walls of the building
- First is the fact that you may not be able to find that particular kind of siding anymore without having it specially milled.
- Second is anytime you pull something off an old building, you’re very likely to find unforeseen surprises. Because you can’t be certain of the magnitude of these surprises, it is safe to assume everything is going to cost you a little more than you think. Whatever you think the price is, assume it probably cost more than you originally estimated.
Windows- Are they new or old? If it’s an old building, are they wood sash or aluminum windows? Is that something that’s going to need to be replaced? Typically, the double-wood-hung windows that you see in houses or old apartment buildings are not in very good condition. With aluminum windows, I essentially just look at them and decide if I’m going to replace them or not. What you need to be aware of is in many areas where you replace these windows, there may be architecture review committees that require you to replace them with historical windows. This could prove to be very costly, especially if they are wood sash.
wood sash window
Building Corners – Does everything appear straight? If there’s siding, are the lines of the siding vertical or are they all straight? On the corners of the building, what does the wood look like? Is there stucco coming off?
Roof – Does the roof have something called a drip edge? This is a little metal edge that goes into the lip of the shingle roof. Are there rain gutters? If there are no rain gutters, water may not have been running away from the building. Because of this, I will spend more time thoroughly inspecting the foundation.
I look at the shingles of the roof; if there are many noticeable curved edges, it is likely on its last leg. Then, if I think I may need to replace the roof, I will look at how many layers of roofing there are. Typically, you don’t want to go past two or three layers of roofing. What that means is that if you replace a roof that has two or three layers, you need to put in your budget funds to tear off that existing roof before replacing it. You also will need reserves for unexpected issues when you pull of the old roof because you may need to repair the plywood underneath. Depending on how much work you do around the roof, you may have to re-sheet it.
re-sheeting a roof
Fence – Do I need to replace or paint it? Is the fence wood? Is it leaning, does it look like it’s on my property line, does it look I could add private yards for apartment units? Many times, you will find large open areas in the back of apartments that are shared. What we can do is put up a fence around the units and now each unit has their own backyard – a very inexpensive fix that not only can help you get higher rent but can reduce costs because you may not have as much landscaping to maintain
Paint (for older buildings) – If it’s pre-1978 and you have peeling paint, you’re probably going to want to get a lead-based paint test conducted. That’s going to tell you whether you’re going to need to do any kind of abatement or work on the property. If work is needed, you may need to use lead-based paint best practices, which can prove very costly. I usually recommend getting a test. Paint used in older buildings in San Diego is less likely to have lead in it compared to the east coast, where the weather is harsh and requires more durable paint. Most of the properties I have tested did not contain lead, but it is still important to get it tested.
If it is tested and comes back negative you do not need to follow lead based paint best practices. If you have a pre-1978 property and decide not get it tested, you still must work on it like it contains lead based paint – which is a good reason to get it tested in the first place.
peeling lead-based paint
Click here for information on lead-based paint best practices
Front Doors – Aesthetically, are they looking good? Are there any gaps? If I look at top of door, I will look for a little pie-shaped gap at the top. If this is present, it indicates there may be some settling in the property.
Meters – Is it gas or electric? Are there gas meters for all units? If the property runs on gas and there is one water heater, there should be gas meters for each unit and also for the building.If it’s a multi-unit building, I count how many individual meters there are. There should be as many individual meters as there are units, plus one additional one, which would be for the common area. If you’re missing a meter, you may have something called a bootleg property, which means one of the units may have been put in unpermitted (just something to look at). These are important things to note because in San Diego the tax assessor will charge for all the units, and state on the public website that it is X units, but that does not necessarily mean they are legal units.
Electrical – As far as electric meters go, I’m looking at what kind of panel it is. If it’s old, it could be something called knob and tube, which could indicate that I’m going to have to put a lot of money into upgrading the electrical. This will likely increase the interior costs as well. I then look at the circuit panel – is it updated? Then, I’m looking at how many amps each unit has. Ideally, you want 100 amps, but for many apartments, you’ll have between 30-50. Newer apartments should have 100.
Knob & Tube Wiring
I’m also looking at the type of panel; Murray Lampert typically have problems, so I want to check what kind of panel there is. Are there circuits in the units? Is there any room to add additional circuits if you want to add appliances or anything else inside the property? Is the inside of the panel painted? If so, it could indicate that the previous people who worked on the property weren’t doing things the proper way. This would lead me to believe other things were not done the proper way.
This is quite the mess!
I’m looking for bunches of electrical or cable lines running all over the place. We’ve bought properties where it looks like spaghetti running all over the building, and we’ve ended up having to rip it all off and start from scratch simply because it’s easier to do instead of trying to sort it all out.
Staircases – When I walk on the stairs, I make sure to walk very heavy. I’m looking to see if it seems squishy. Is termite damage visible, are the railings stable? In compliance with code, railing spacing should be about three and a half inches. For me, if I can make a fist or place my hand through the pickets of the railing, it is most likely not up to code and I’ll have to replace it depending on my insurance company and how bad it is. I look at the stairs to see if the tread rise and depth are consistent. It should be around 7” of rise and 11” of depth. If they are not to code they may need to be replaced.
Inconsistent stair depth
After An Inspection – Once the inspector gets into the property and finds things that I may not have found, do I decide not to buy the property? No, not at all. It just helps me to figure out what it’s going to cost to fix or if I even want to fix it, and what exactly I’m getting myself into. That’s what is critical about the inspection. You can make a well-informed decision on the property rather than going in blindly and being surprised later.
It is naïve to think you can figure out how to hit a certain number or certain profit, or how to stay within a tight budget, without being informed of all the problems. This is valuable while I’m negotiating in the beginning. If I’m coming in lower than the initial offer, I can right away talk to them about some of these problems, which, most likely, the owners already know about but haven’t disclosed yet or many times they had no idea there were these problems which make it easier to negotiate.
Keep in mind, none of this is 100%. These are just good rules of thumb when looking at a property. They have served me well to establish if an investment property warrants further investigating and analysis, and if so, what kind of offer to submit. This obviously isn’t everything. I depend on inspection in most cases. I will be posting an interior walk through an article in the weeks that follow. I’m interested to hear your story and what else you may look at when walking a property. Please share your take in the comments below.
**Disclaimer** – make sure you are walking the property with the consent of the current owner. Please keep in mind we are in the San Diego market and practices in your area may be different. I highly reccommend you get a building inspector to look at the property unless you are highly confident in your ability.
Curtis Gabhart, CCIM President Gabhart Investments, Inc.
Edited By Blake Imperl, our newest intern at Gabhart Investments. Check out his Linkedin page by clicking here.
Gabhart Investments, INC. (GII) is a privately held real-estate investment firm based in San Diego, California. We operate in a rapid paced project driven environment. The employees at Gabhart Investments, INC. (GII) are close-knit, highly qualified professionals, possessing the necessary competence to meet our clients’ goals. GII promotes ethical balance for continuous training, leadership, and teamwork. Since 2000, GII has acquired and converted multi-family properties into condominiums throughout San Diego County. The new real-estate market has presented us with many opportunities to take advantage of. Along with our equity partners, Gabhart began to grow its portfolio in, arguably, the strongest housing market in the country. Thus, we consistently generate superb risk-adjusted rates of return for our investors. In 2005, Gabhart’s private investment portfolio had transactions in excess of 40 million dollars. We intend to accelerate our business model by maintaining our focus within the purchasing and rehabilitation of bank owned real-estate property. Our additional services include consulting, brokerage, venture funding, development, construction management as well as property and asset management.
Check out our other blog posts here
How My Views on Commercial Real Estate Are Changing
By: Blake Imperl
As I am approaching the end of my first month as an intern at Gabhart Investments, I’d like to reflect on what I’ve learned, and what has changed thus far.
What I’ve Been Doing
Over the past few weeks, I have been spending a lot of time reading the material Curtis has provided me on Property Valuation & Investment Analysis. Although it is mainly an overview of the subject, it has proved to be some highly valuable content. This material essentially picked up where I left off in my Real Estate Investment Analysis class that I took last semester at San Diego State. I have been brushing up on subjects like tax benefits, 1031 exchanges, expenses, leverage, returns, evaluating cash flow, and much more. I still have a great deal of learning to do on these subjects, but it is exciting to see how what I’ve learned in the classroom correlates to real world applications. It is my intention to continue to read up on these subjects and ask as many questions as I can.
I’ve also been observing how Curtis and his team assemble marketing packages for commercial properties they are listing. I was doing things similar to this at my last internship at Realty National, so I’ve enjoyed seeing how this translates in the commercial arena
Commercial Real Estate Blog Posts
Another task I have taken on is the editing of Curtis’s blog posts. My first edit was a post on property walkthroughs. One tremendous benefit of doing this has been the information I’m learning is sticking much deeper than if I just glanced over it. It’s proved to be a great learning tool for me and I’ve even taken on the task of researching some of the topics I was curious about. Writing has always been a passion of mine, so getting the opportunity to revise and write some stuff has been great. I’m excited that I will get to continue to edit blog posts during my time here.
This past week I had a great learning opportunity with Curtis to do a walkthrough of a 13-unit apartment building in Fallbrook. I was able to learn about some of the things you should be looking for in a property, both on the interior and exterior. This was a neat real life application after reading Curtis’s article on property walkthroughs. This is certainly the kind of stuff you’d never learn in a class room.
13-Unit Apartment Building In Fallbrook
La Jolla Multi-Family Building
Another property we looked at was a 5 unit multi-family building in La Jolla. This was a very intriguing property because it had great bones, was less than a block to the beach and offered several routes for renovation. When walking the property, we looked at things like the condition of the floors, the bathrooms, kitchens, balconies, electrical, etc… It was far from move-in-ready, however, at the right price this could prove to be a great deal.
Curtis and Abe inspecting the condition of the upstairs balcony
the interior of the detached studio
Co-Star Lunch & Learns
In addition to the property walkthrough, I’ve also attended two Co-Star lunch and learns with Curtis and his assistant Dianne. The one that stood out to me was on the housing forecast over the next few years in San Diego County. I enjoyed this meeting because this is a real problem we will be tasked with fixing over the next decade. This past semester in my investment analysis class I did a great deal of research on this subject, so it was neat to hear the industry take on the issue.
Lastly, I have very much enjoyed the opportunity to pick Curtis’s brain. He’s always offering me valuable tips and knowledge about real estate and just life in general. Whether it be tips on client relations, listing properties, or even just financial management, I’ve been trying to act like a sponge of knowledge. He’s always honest about things and I respect that.
My views on real estate are growing stronger than ever and I’m excited all the learning opportunities that lie ahead. I am finding that the San Diego Commercial Real Estate Market contains more possibilities than I ever could have expected. Stay posted for my final update in August!
In a bit,
Intern, Gabhart Investments
Blake Imperl – 22 Year Old Aspiring Commercial Real Estate Professional
I moved from Milwaukee to Scottsdale, Arizona when I was 5 years old. Spending my formidable years in the desert climate, I always had dreams of moving to the beach. As the son of a former real estate developer, I was exposed to real estate from a young age. My dad specialized in multi-family and student housing developments in and around the Milwaukee area. Upon graduating high school at 18, I moved to San Diego to study marine biology at San Diego State University. I quickly realized I wasn’t cut out for the science world and changed my focus to pre-business. It wasn’t until my sophomore year that I decided I wanted to be a management major with a real estate minor. I accredit this route to the all inspiring business professors I had at SDSU and to my involvement with The Real Estate Society. As a person who thrives on leadership and entrepreneurial opportunities, the knowledge and values I acquired during my time at SDSU will serve me for the rest of my career. Outside of real estate, I am an avid musician who plays in a local indie rock band called Stray Monroe. We’ve had the fortune of playing at some great venues around San Diego including The Casbah and Soda Bar and have also been played on 91X and 94.9FM. I also enjoy traveling, spending time with my girlfriend, and practicing Portuguese.
Why did you choose to intern with Gabhart Investments?
I chose to intern with Gabhart investments for several reasons. First, Curtis seems to have an amazing drive and motivation to succeed. From the first time we met, I could sense that he carries himself to a high level of professionalism with an immense entrepreneurial spirit. Though I had been exposed to commercial real estate before meeting with him, I never entertained the idea of making it into a possible career. He definitely opened up my eyes to all the opportunities that could be had in commercial. Second, Curtis is a very generous person who gives back to the real estate community. His involvement with past interns, students, and aspiring professionals, really spoke volumes to me. I sensed that if I gave it my all during this internship that I would get a lot back. Lastly, I really liked the opportunity to learn in a small team environment. I felt that I would get a great deal of hands-on experience and intangible knowledge.
How did you hear about the internship?
I heard about this internship through my former boss, Randy Zimnoch, who is the owner of Realty National. Realty National is an investor-friendly and full-service brokerage based out of Pacific Beach. They’ve developed a stellar team of over 30 agents since their inception in 2011. Randy was crucial in setting me on the career path that I am on now. Without his guidance, I think my focus in real estate would have been entirely different.
Why would you work for free?
Knowledge is invaluable. What I will be learning over the course of this internship far outweighs any minute compensation I could currently earn elsewhere. I realized early on in my college education that you can’t monetize the value of experience, because it’s that very experience which will make you more money down the line. In my initial meeting with Curtis, he asked me about my professional goals. One of the things I told him was that it was a personal goal to be a millionaire by the time I’m 30. He told me through hard work, smart decisions, determination, and a bit of luck that it could be possible. This isn’t to say I anticipate real estate being a get-rich-quick process; I fully understand you need to be in for the long-haul. Judging by how successful he has been thus far, I think it’s safe to say I’m learning from somehow who could teach me some things on how to make that possible.
What are you trying to accomplish?
It is my goal to walk out this internship a much stronger professional that I was before. I will achieve this by applying myself and acting like a sponge of knowledge. I want to understand the commercial arena better and pick up on some things that have made Curtis so successful. I’d like to also understand how I can hit the ground running upon graduation in December of this year. It is my hope that I can add many invaluable tools to my real estate belt that I will be able to utilize for years to come. Lastly, and most importantly, I want to add as much value as I can to Gabhart Investments.
Why is it you are interested in Real Estate?
I touched on this early, but I attribute my interest in real estate to my father and The Real Estate Society at SDSU. From a young age, I remember walking properties with my dad, doing napkin math, and talking real estate. Though I may not have realized it at the time, he was planting the seeds that would eventually grow into a profound interest. Once I got involved with The Real Estate Society in my sophomore year, I began to apply a lot of those concepts my dad and I initially discussed. I went to every guest speaker event, every case study, networked, took notes, and constantly worked on my professional development. I also served as Director of Marketing during my third year and this past year I was Vice President on the executive board. Lastly, I need to thank my many mentors who have helped me along the way; David Smith, Sean Bascom, Kris Kopensky, Mark Goldman, Mike Wolfe, Cody Zindroski, Jessica Barber, and many others. Their support and knowledge have proved to be invaluable.
I will be making monthly posts on my progress here at Gabhart Investments, how my views are changing in regards to real estate, and any other new updates. Stay posted!
In a bit,
KW COMMERCIAL | Gabhart Real Estate Advisors presents:
“GET INTO COMMERCIAL REAL ESTATE SEMINAR & CAREER NIGHT”
In One Hour Find Out:
* Is Commercial Real Estate right for me?
* What’s so great about commercial Real Estate?
* Am I ready?
* How long will it take to make money?
* How much money will I make?
* What are the risks?
* How do I find the right company to work with?
* What if I do not have any experience in Commercial Real Estate?
* How much money do I need to invest in my new business to get started?
* How to leverage your existing client base to turbo charge your success.
* How do I make the transition?
Tuesday, February 23rd, 2016 6:00 PM to 7:00 PM (PST)
Keller Williams Carmel Valley Del Mar
12780 High Bluff Drive Suite 130
San Diego, CA 92130
Register today! Due to limited seating, we encourage to RSVP in advance.
Registration is charged at $10 which will go towards The University of San Diego Real Estate Program to help students who are pursuing a career in Real Estate. Door prices is at $20. Light snacks will be provided.
Click here to register!
The presentation will be put on by Curtis Gabhart.
Curtis Gabhart has been a successful Real Estate professional for more than a decade. He is a Director at Keller Williams Commercial Brokerage and President of Gabhart Investments, Inc, a privately held real estate investment firm that manages a syndication of private investors, specializing in acquiring and renovating single and multi-family properties. He also serves on the Commercial Advisory Board at the University of San Diego Burnham-Moores Center for Real Estate and he teaches commercial real estate courses for the California Association of REALTORS® and San Diego Association of REALTORS®. He has been recognized by members of Congress, California State Senators, the City of San Diego, and had a day named after him in the County of San Diego for his community service and dedication to the community. He was awarded as the Dealmaker of the Year for 2015 in Retail and Multi-Family category.
“You taught me what it takes to be a successful real estate professional. The daily responsibilities and duties required to be a great salesman. Most importantly, you turned me into a business man. Since I started working under you as a sales associate at ACI Commercial I never made less than $100,000 per year. Now, I run my own office with 8 sales associates, and manage over 250 rental units” – Brian Nelson – Former Treasurer of the SDSU RES, President/Principal South Coast Commercial, Inc.
“I learned more about how real estate transactions and construction projects work in the few months I worked with Curtis then I could ever have hoped to learn in the classroom. Curtis showed me how real estate deals are found, transacted and managed from start to finish. I am glad I took advantage of the opportunity to work with Curtis, it opened my eyes to the endless possibilities that can be found in real estate investing.” –Sean Bascom, President SDSU Real Estate Society
“Curtis, I enjoyed your seminar enormously. I can see it would give any residential realtor an advantage if they want to go into commercial real estate. Your class was fun and a great learning experience at the same time. After attending your seminar, I listed over 2 million on commercial real estate using the techniques I learned at your seminar. I won’t hesitate to recommend it to others. Thank you” –Ramon Cardenas, RCA Commercial Group, Pico Rivera, CA
“Curtis provides great insights and strategies on how to build your real estate business, as well as how to work effectively with both buyers and sellers. Even the information on software selection and networking opportunities was helpful. I would highly recommend the class for those serious about their success is this lucrative niche of commercial real estate.” – G.W. Alexis, Broker
“Attending the Multifamily Brokerage seminar put on the NSDCAR Commercial division, presented by Curtis Gabhart, proved to be very informative and educational. I found the seminar to be chock-full of specific strategies and tips relating to successful commercial multifamily brokerage. The information was pragmatic, real and helpful for both a new broker getting into the business, as well, a refresher on what is important for those already in the business. “ – Brad Rust, President and Co-Owner at Giovi Real Estate Group, Inc., Co-founder at Lucid Capital Solutions, President at Giovi Real Estate Group, Inc
Have questions? Contact us at (858) 356-5973.
Foundations of Commercial Real Estate: Players & Properties
If you think about it, there really are only two facets to dealing in property; the people, and the properties. Everything falls into or between these. So let’s begin your entrance to the world of commercial real estate (CRE) and take a deeper look at both of categories.
Many people who are commercial developers have a background in brokerage.. While there are many similarities, the largest key difference between the two is that emotions play a much smaller role in commercial real estate as compared to residential real estate. Buyers, Sellers, Tenants & Landlords are much more motivated by profit than by individual preferences. Of course commercial real estate transactions are often much more complex and take longer to complete as well.
Now, let’s consider the major players involved in the Commercial Real Estate Industry:
The Major Players
Real Estate Brokers
As anywhere else, the job of the broker here is to find and facilitate a transaction between a buyer and a seller. Most who play this role in CRE call themselves brokers, however this is not necessarily 100% accurate as some people hold a broker’s license, while others hold a salesperson license. Brokers working for buyers, more often than not, need to find properties suitable for purchase outside existing MLS listings. Whereas brokers working to sell a property need to target a highly niche segment of buyers and investors. As commercial real estate transactions are quite complex, brokers may or may not be involved in the entire spectrum of the transaction. Additionally, they may or may not refer other professionals during the course of the transaction.
The key thing for residential realtors to realize is, that their previous buyers may prefer to deal with or through them, rather than a commercial real estate broker who they don’t know. Thus, it is highly recommended for residential realtors to joint venture with or refer to a commercial broker who has the experience….. that their clients can be served without losing business or relationship value. (Let us know if you are looking for tips on evaluating the right commercial real estate brokerage to associate with and how to negotiate with them, we will have an article on that soon.
Plus, it is crucial to note that the Code of Ethics layed out by San Diego’s Association of Realtors ® recommends against brokers practicing beyond their expertise. For more details, refer to their publication here.
As with any real estate transaction, finance needs to be secured. While most buyers have their own source of financing, the broker needs to have relationships with various types of lenders; construction, acquisition, equity and permanent. These relationships are useful during preliminary valuations and can also be crucial in enabling financing of the final transaction.
Just like most commercial real estate players, it’s important to have a lender who specializes in the product type you are dealing.
Architects, Engineers & Planners
During development and redevelopment (and sometimes even leasing) buyers may need the assistance of any of these professionals, so it is important that a broker has developed such relationships beforehand to enable a smooth transaction.
As the profit motive is significantly larger in commercial real estate deals, buyers and sellers will often want financial and tax advice. This is usually done by consulting with their own accountants and financial advisors, which is fine and recommended, however, when appropriate it can be helpful for the broker to be involved in these transactions so the broker can better advise on the real estate portion of the transaction based on the items the principal financial advisor recommend.
There is no doubt that legal advice will be needed in any commercial real estate transaction and as a broker, unless you hold a license in law, you are not permitted to provide that advice or draft legal drafts and deeds. It is, again, therefore important that the commercial real estate broker has established relations with competent lawyers who can facilitate transactions rather than killing them. Are you looking for such attorneys to work with? Let us know and we would have happy to provide references.
Sellers want appraisers’ valuations in order to establish a selling price. Buyers pay for appraisers as mandated by lenders before they extend the loan in order to purchase the property. Appraisers need to be not only specialized in commercial real estate, but also in the type of commercial real estate as the property under consideration.
Depending on the type of transaction, various other professionals may need to be involved. This will change from time to time and here are a few scenarios elucidating the requirement of additional outsider help:
- Business Brokerage
This brings us to the closure of this part of the article. Do you know any of these professionals who you would like to recommend? Are you looking for any such professional for your transactions in San Diego Commercial Real Estate? Or do you just have some questions? Drop a comment and share; we would love to hear from you.
San Diego Commercial Property Types
As mentioned already, Commercial Real Estate transactions are much more complex than Residential real estate ones. As a result, brokers often need to be specialized within specific types of properties of Commercial Real Estate. However, if the geography is a small market, it is possible for the broker to service most segments within commercial real estate. But in more larger markets, including San Diego Commercial Real Estate, it is very difficult to know the market of every product type. make sure the broker you are working with has specific experience in the type of property that you are interested in.
While there are many types of properties with the San Diego Commercial Real Estate Industry, the major ones are ;
Multi-Family 5+ Units (more on this later)
Some of the smaller segments include Hospitality, Storage and Multifamily, which is last in this list, but the largest within this category of sub segments. Interesting to note that Gabhart Real Estate Advisors has experience within most of these segments in San Diego!
Now let’s consider each major type of property within the Commercial Real Estate segment:
Each type of user has their own requirements. As a broker it’s important to understand the factors that tenants would consider important for their business. What is important for a Law Firm is not likely to be important for an IT startup, and so forth. While there are many sub categories (Converted homes, Low-rise, Mid-rise, High-rise, Specialty etc.) within this category, most of San Diego’s Office Properties fall under the following:
Footfall, window and internal display & layout are the more important variables in this type of property. In San Diego Office Showrooms often fall within prime localities in order to attract the most customers.
As the name suggests, a space suitable for storage of goods (depending on the type of goods) as well as administrative and sales teams. Location, price and usability are often the most considered points in such transactions. Certain suburbs of San Diego are well known for Office warehouses.
Security, Storage capabilities, Bonded, Climate control are some factors to consider. Most of San Diego’s Warehouses are located in suburban areas around the 13 cities.
Here, often legal matters matter the most. Free trade zones, licensing for light and heavy manufacturing are of prime importance. Availability of labor nearby is another key consideration. Free Trade Zones # 153 in the San Diego / Tijuana area is very popular for various manufacturing concerns for precisely these reasons.
Is another type of industrial product (do a small amount of research to make sure I am correct and do a small blurb.
Apart from the factors mentioned in various types of office spaces above, there are various more which apply to some or all such properties. They are:
· Labor pool availability
· Proximity to customers
· Transportation access
· Space configuration
· Ceiling Height
· Floor Load
· Docking area
· Sprinkler systems
· Zoning laws
· Govt. Incentives (local, State & National)
· Buy vs. Lease
Additional resources recommended by National Association of Realtors ® is available at the website of Society of Industrial and Office Realtors ® www.sior.com and the CCIM Institute www.ccim.comalso add IREM
Again, this is a wider segment than most may imagine and carries various sub categories of properties within the retail real estate segment. They are:
These are used by destination orientated retailers such as Banks, Retail Chains or even Grocery shops.
When retail is being financed, the tenants business strength is reviewed for considering the tenants lease as a security for a loan. Financially stronger tenants in San Diego (and other places) are often granted better terms. However, these terms may change during the course of tenancy based on the business outcomes of the tenant.
Big Box properties in San Diego are limited to large National or International companies. These are companies that require 25,000 + sq. ft. of space, sometime even more than 50,000 sq. ft.
Small Strip Center
There is no dearth of San Diego’s Small Strip Centers. These are buildings which contain numerous mom and pop shops i.e. retail outlets which are typically owned and operated by the same person.
Neighborhood Shopping Center
Every San Diego neighborhood has one as each such center services within 1-3 mile radius. There is always several anchor tenants, which vary from cleaners, nail shops, grocery stores et al. Recent trends observed by the National Association of Realtors ® notes that drug stores used to be a part of such shopping centers, however increasingly they have become stand alone shops near the parking lot, and as such, are known as an “outparcel”.
Community Shopping Center
These buildings service a larger community than neighborhood shopping centers. They typically service up to a 10 mile radius and house a major retailer such as Walmart, or Movie Theaters etc. Fashion Valley & Westfield Horton Plaza are a few that fit this category.
Regional Shopping Center
As implied, these buildings service a wider region and are often known as malls even though they need not be an enclosed space. Tenants include a variety of Regional & National tenants including boutique stores. The size of such stores range between 400,000 sq. ft. and 2 million sq ft. Beyond that, and they are known as super regional. However, it is not just the size of the mall that determines if a mall is a super regional shopping center, but also the tenant mix and sales per square foot to ensure that the building is actually popular amongst customers.
These centers vary in size and objective. They can house certain types of décor such as antique or be geared towards a certain segment such as parents by selling just baby related items. Belmont Park is an example of a San Diego Specialty Center, focusing on wearable and accessories for beach goers. Surfs up dude!
This is where monuments are made. Realtors ® focusing on Land deals are often (or should be) Accredited Land Consultants, which is a designation imparted by the Realtors Land Institute. This is a highly specialized niche within commercial real estate as planners, architects, engineers, developers and brokers are all often involved. Some of the key considerations in San Diego’s Land transactions are:
· Suitable Soil
· Nearby Amenities
Let us know what you think and what else you would like in included in future posts.