Longmont , CO
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Longmont , CO
(720) 600-9513

What to Consider Before Investing in Office Buildings

Category: Subleasing real estate

What to Consider Before Investing in Office Buildings

September 13, 2023

Investing in Office Buildings

If you are pondering a commercial real estate investment, office buildings are likely on your radar. If you’re already invested in residential real estate and other types of commercial property, office buildings can be a unique way to diversify. They can provide cash flow opportunities, tax benefits, and long-term appreciation. 

When people think of office space, some immediately go to skyscrapers in downtown Denver. Office space, however, can be acquired on a much smaller scale and attract various tenants aside from corporate giants.

If it seems like office space would be a great addition to your portfolio, there are a few things you should consider before you take the leap.

What to Consider

Before investing in an office building, here is what you should consider:

  • Location: As with any piece of real estate, location is critical. Choose a site that will fit your potential renters and their businesses. 
  • Quality: Not all office spaces are created equal. Consider your budget and try to find the building with the highest quality structure, mechanical systems, and finishes. 
  • Size: The amount of property you are willing to manage and the type of tenant you hope to attract will dictate the building size you choose. 
  • Layout: Does the building provide an open concept or a walled office setup? Reconfiguring layouts can take significant time and money, so be sure the space is usable for your potential tenants. 
  • Tenants: The type of tenants you want will significantly impact the building you invest in. Every kind of tenant requires a different location, layout, and amenities. 
  • Leases: Whether there are existing leases or if you will be acquiring all new tenants, it’s essential to consider what types of leases you prefer. 

The Real Estate Cycle

As we all know, real estate is cyclical. Commercial buildings, including office space, are no different. A good investment stands the test of time and is versatile through all cycles. If you are considering investing in commercial office space, consult an experienced commercial real estate broker to be sure you make the right investment. 

Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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What are Commercial REITs?

September 6, 2023

What is a REIT?

A REIT, or real estate investment trust, is an investment vehicle that is used as an alternative to purchasing a single piece of real estate. 

Purchasing a property takes large amounts of time, effort, and money. If buying real estate on your own feels out of reach, a REIT allows you to be a shareholder in a company that owns many pieces of real estate. This eliminates the need to search for and manage a property, and also greatly reduces the financial commitment. 

There are three major types of REITs, including equity, mortgage, and hybrid. Each offers unique benefits that are worth exploring if you are considering investing. 

How do Commercial REITs Work?

Commercial REITs are companies that own income producing commercial properties. These types of REITs typically own real estate such as apartment buildings, shopping centers, hotels, hospitals, and corporate offices. 

Most REITs focus on a specific type of property, however, some try to diversify their portfolio by owning several different subtypes of real estate. Diversification can help to reduce risk in the event that one sector of the real estate market performs poorly.

Overall, the company generates revenue by leasing its owned real estate to businesses in need. In turn, the REIT pays out a portion of its rental profits to the shareholders. 

Your Investment Strategy

Depending on your investment strategy and your financial situation, a REIT may or may not be the right option for you. Consulting a real estate expert is the best first step to determine how you’d like to set up your investment portfolio. 

Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Tips for Subleasing Commercial Real Estate

July 18, 2023

What is Subleasing?

Subleasing is common in both commercial and residential real estate, and involves the current tenant leasing their rented space, or part of it, to a new tenant. 

The new tenant, therefore, is known as the subtenant, and the agreement between the two is known as a sublease. The subtenant pays their rent directly to the original tenant, who then pays the landlord. Subleasing has many advantages, and following the tips below will ensure the process is successful. 

Tips for Subleasing

Here are a few tips to consider prior to subleasing commercial real estate:

  • Work with a knowledgeable commercial real estate agent who has experience in subleasing agreements and can advise you accordingly.
  • Research the area and property extensively before signing. Make sure it will be an excellent fit for your business!
  • Consider having an attorney review the sublease in detail to ensure the agreement is fair. 
  • Don’t be afraid to negotiate the terms of the sublease to better benefit you. 
  • Interview the tenant to make sure they are someone you can trust.
  • Throughout the sublease, communicate frequently with the tenant/landlord about expectations. 

Depending on your situation, subleasing might be the best option for your business. Subleasing can broaden opportunities for office locations and is often more cost-effective. Knowing the ins and outs of being a subtenant and following the tips above will help ensure success in your next subleasing endeavor. 

Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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6 Benefits of Hiring a Commercial Real Estate Broker

June 20, 2023

The world of real estate can feel like the Wild West. There are many different ways to navigate the buying, selling, and leasing process, and some try to do it all on their own.

In commercial real estate, it is common for businesses and individuals to go unrepresented when looking to purchase or lease. Some consumers simply don’t understand the advantages of partnering with a commercial real estate broker. 

Working With a Commercial Real Estate Broker

Let’s dive into a few reasons why working with a commercial real estate broker is the right decision. 

  • Time: Allow your commercial real estate agent to do the heavy lifting! They will search for properties, set up showings, and prepare contracts on your behalf to save you time. 
  • Money: Hiring a broker does not always mean money directly out of your pocket. Often commissions are paid based on the lease amount or purchase price and are normally paid by the seller or leasing landlord. 
  • Negotiations: Negotiating a real estate transaction is a skill. Your agent knows the tactics to secure the best terms possible and save you money. 
  • Legal: Commercial real estate contracts are complicated and have legal consequences. Having an experienced professional to explain the nuances is key. 
  • Data: Your real estate agent has access to many search engines and market stats you will need to make a well-informed decision. 
  • Knowledge: A broker’s general knowledge of the industry, your local market, and real estate contracts will ensure you stay on the right path. 

Hiring a Professional You Trust

Hiring a professional that you trust, who will work in your best interest throughout the transaction, will make the process seamless. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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How to Maximize Your Building’s Cap Rate

April 26, 2023

Maximizing Your Building’s Cap Rate

Maximizing your commercial real estate building’s capitalization rate, or cap rate, tends to bring the best return. 

A cap rate considers a building’s current market value and net operating income and produces a percentage that shows the investment potential. Additionally, a higher cap rate typically leads to higher risk, so each investor needs to determine their comfort level based on their situation. 

What Affects Cap Rates?

There are various ways that cap rates can be affected. The following are factors to pay attention to when evaluating the investment potential of a property:

  • Market Trends: Market trends substantially impact a building’s value. When there is strong demand, a building will be worth more. When there is a large influx of supply, a building’s value may drop. Any change in a property’s value will ultimately alter the cap rate for better or worse. 
  • Leases: Cap rates are dramatically affected by the amount of income the building produces. The types of leases in place and the rental rates are crucial in maximizing returns. 
  • Location: The location of any piece of real estate is essential. If you are looking to draw a specific tenant or demographic to increase rental income, you need to be in the correct location. 
  • Condition: The condition of the building can have a major impact on cap rates. A property that needs little to no updating will likely draw higher-paying tenants but will have a heftier price tag. 

Finding a building that doesn’t just excel in one of these categories is crucial. To maximize your property’s cap rate, you must ensure it has the best combination of the abovementioned factors. 

For example, just because a building may be in perfect condition, a bad location may result in a lower cap rate. Or, if the real estate market is strong, but the leases in place don’t have great terms, you may be leaving money on the table. 

Your commercial real estate agent will work with you to understand your investment goals and strategy, and help you find the right property to fit your needs. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Pros and Cons of a Triple Net Lease

March 30, 2023

What is a Triple Net Lease?

A triple net lease is one of several lease structures in commercial real estate. In general, net leases require the tenant to pay other expenses in addition to their base rent. There are single, double, and triple net leases, which refer to the number of additional costs the tenant must pay.

A single net lease involves the tenant paying base rent and property taxes. A double net lease is structured so that the tenant pays property taxes and insurance in addition to their rent. Finally, with a triple net lease, the tenant pays the base rent plus property taxes, insurance, and maintenance.

Pros of a Triple Net Lease

There are several pros of a triple net lease. As a landlord, a triple net lease leaves little room for risk. The tenant is paying all of the building’s expenses, so the property owner can be sure they will not incur unexpected costs. 

For a tenant, a triple net lease gives more control. They don’t have to manage the building’s upkeep and appearance. Additionally, the tenant often has control over their utility usage and the associated costs. 

Cons of a Triple Net Lease

There are a handful of cons to keep in mind when considering a triple net lease as a landlord or tenant. For landlords, finding a solid tenant willing to take on a triple net lease can be challenging and, therefore, may result in vacancies. In addition, the tenant is given lots of automomy, and the landlord must trust that they have the financial ability to maintain their leases space properly. 

As a tenant, the biggest con is the risk. With complete control of the building comes elevated risk exposure. If the building starts experiencing maintenance problems, the cost falls on the tenant. Additionally, property taxes and insurance increases will directly impact the tenant’s overhead. 

Figuring out the right lease structure for your property or business can be difficult. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Common Commercial Lease Terms to Know

March 2, 2023

Does Commercial Real Estate Have Its Own Language?

Depending on your level of experience, commercial real estate may seem like it has its own language. There is no shortage of acronyms and unique vocabulary. Educating yourself on standard terms in commercial real estate is crucial to excelling as an investor or real estate professional. 

More specifically, when looking at a commercial real estate lease, you need to understand the terms used. A commercial lease can have severe financial and legal implications if you don’t correctly understand its terms. 

Common Commercial Lease Terms to Know

Let’s take a look at a few common commercial lease terms to know:

  • Lease Term: This is simply the lease length from start to finish. After the lease term, there may be specific rules about renewing your lease.
  • Purchase Option: Depending on the verbiage, a purchase option can require or allow you to purchase the commercial real estate space at the end of the lease.
  • Subletting: This determines whether or not you can rent out a small portion of your rented space to another tenant. 
  • Go Dark Provision: A go dark provision allows the tenant to stop operating their business when they are no longer making a profit without defaulting on the lease terms. These are common in retail centers. 
  • Landlord’s Solvency: This aspect of a lease details the tenant’s rights if the landlord goes into foreclosure. 
  • Zoning: The building’s zoning determines what type of business may operate in that location. 
  • Escalation Clause: An escalation clause increases rent over a given period. The increases may be due to higher maintenance costs or stronger sales/business activity. 

Understanding commercial lease terms and partnering with a professional to help you through the leasing process is critical. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Build-Outs in Commercial Real Estate

January 18, 2023

A commercial build-out comes into play when a space, previously occupied by a tenant, is now leased by a new business that will use the suite differently. 

Tenants use commercial real estate spaces for various reasons, and every renter has their own needs. Some spaces may be the perfect fit as is, and some will require minor or extensive renovations to suit a new tenant. 

Commercial Real Estate Build-Outs

A commercial real estate build-out refers to anything required to make a space ready for your business. Depending on the existing building, a build-out may include new lighting, removing or adding walls, designing a waiting area, installing a kitchen, or creating new offices or storage areas. 

If the current space functions well for your business, a build-out may be unnecessary, and you may simply add a fresh coat of paint to complement your brand.

If your company is looking for new office space, you will likely be able to find a building that works efficiently as is. If, on the other hand, you are looking to open something more unique, like a bar, restaurant, or arcade, you will likely renovate (build-out) to create the right atmosphere.

Who Pays for a Build-Out?

There is no perfect answer as to who pays for a build-out. Everything is negotiable in commercial real estate transactions, and the same applies to a build-out. The landlord may cover the expenses, the tenant may be solely responsible, or they may share renovation costs, depending on the negotiated lease.

Be sure to consult an experienced commercial real estate broker as you choose your new space and decide on a build-out strategy. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Sale-Leasebacks in Commercial Real Estate

December 20, 2022

A sale-leaseback is an agreement between a buyer and seller that the buyer will purchase a property and then lease it back to the seller for a specified period. Sale-leasebacks are used for various reasons and have pros and cons for both parties. 

Pros of Sale-Leasebacks

As the seller (who becomes the tenant), one of the main pros of a sale-leaseback is an influx of cash. You can still use the property you once owned, but the mortgage is no longer associated with your business. Additionally, any equity you achieved while you owned the property is now liquid.

As the buyer (who becomes the landlord), a sale-leaseback allows you to purchase a property knowing that you already have a tenant with a specified lease agreement. This eliminates any risk of immediate vacancy and negotiating a lease with an unknown tenant.

Cons of Sale-Leasebacks

The most obvious con of a sale-leaseback for the seller is that after the sale occurs, the seller no longer reaps the benefits of the property appreciating. Additionally, while they remain in the building as tenants, there will be certain restrictions on modifying/remodeling based on the lease agreement. 

As the buyer-landlord, the main drawback is any issues that may occur with the seller-tenant. The tenant may require extra supervision as they are accustomed to treating the property as if they were the owner. 

Rely on Your Broker

When in doubt, rely on your commercial real estate broker to help determine when and if a sale-leaseback is the right fit for you and your business. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Top Trends in Modern Office Building Space

October 11, 2022

Commercial real estate and the use of office buildings has dramatically changed in recent years. Coworking spaces, work-from-home options, and modern technology have created opportunities that the general workforce never had before. 

Overall, standard offices have transitioned to more inviting and collaborative environments. Below are a few of the top trends in modern office building design. 

Efficiency 

As with most newer construction and remodeling, office buildings are making sure to emphasize efficiency when creating unique spaces. Using durable and high-quality materials reduces repair and maintenance spending and cuts down on utility costs over time.

Collaboration

Cubicle walls separate many traditional office spaces at every turn, while newer designs provide space for collaboration. Employees now sit at smaller workstations within a larger open area. Forgoing the heavily divided space allows team members to meet and collaborate easily. 

Visually Appealing 

New office designs include modern furniture and interior elements, plenty of color, open concepts, and abundant natural light. Updated finishes and colors make for an energizing workspace, and the use of glass walls to separate offices and meeting spaces creates a bright environment.  

Built-In Technology

Down to the minor details, companies are designing their offices with plenty of built-in technology. Conveniently placed outlets, projectors and smartboards, and wireless phone charges are keys to creating a thoughtfully designed work area.

Recreation

Beverage stations, ping pong lounges, and nap rooms—Who would’ve thought these features would end up in office buildings? Unique recreation spaces have become increasingly necessary to recruit and keep top talent. 

Innovative Meeting Spaces

Conference rooms and large private offices are a thing of the past. Open concepts allow for team meetings with employees remaining at their workstations. Additionally, updated offices are more likely to feature smaller meeting hubs for a few employees to hold meetings or take private phone calls.

Looking for a New Office Space?

Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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#longmontcommercialrealestate #commercialrealestatebroker #northerncoloradocommercialrealestate

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