Often when our clients are looking to build new business premises, they will need/want to sell their existing property at some point during the process. In this article, we will discuss the following common mistakes to avoid when selling your existing commercial/industrial property:
Renovations, fit-outs, and extensions are carried out from time to time to existing premises, and ensuring the compliance paperwork is completed and issued can often get missed. Prior to listing your property, it is important to check if there are any outstanding compliance issues such as a Code of Compliance Certificate (CCC) not being issued for the building or subsequent work. This can be checked by obtaining and reviewing the LIM report for the property. Real estate agents have mentioned that it is common for building consent to be granted but no CCC issued. A property without the correct CCC documentation would often sell for significantly less than if the CCC paperwork had been in place. It is recommended that all building work is signed off and Code of Compliance is issued prior to listing your commercial property.
Potential buyers will want to understand a number of things about your property and if you don’t have the property information prepared it will take potential buyers longer to gather the information to make a decision and ultimately purchase your property.
Property info you should consider preparing are:
Owners who don’t engage a real estate agent often underestimate their property, and unnecessarily end up taking a loss of profit. A recent example heard from an agent was a property that was sold privately for what the owner thought was a healthy amount. It turned out that the agent had a number of potential buyers that would have been interested in the property and would have been prepared to pay over $500,000 more than what it was sold for!
On the other hand, you need to ensure you don’t offer a property for an unreasonably high amount. Having above-market expectations can discourage potential buyers and prolong the entire sales process. Although you might think it’s not a problem to wait 2-3 years to close a sale, in reality, this approach will only bring future price reductions: nobody is interested in properties that have been sitting on the market for a long time.
It may seem obvious, but first impressions count. If your property looks run down or shows signs of deferred maintenance buyers will approach with caution or lower their perceived value of the property due to the work they may need to spend to tidy it up.
Make sure the exterior is as attractive as possible. Some relatively low-cost improvements to consider are:
Internally, it is also important to:
Often, business owners who are looking to move from an existing premises they own to a new-build premises underestimate the time it may take to plan and complete a new building project and relocate their business. If you are looking to sell your building and rent it back while your new building is being built it is recommended to allow a reasonable time buffer within your Deed of Lease or have a right of renewal clause included. No business owner wants to be without somewhere to run their business from and it would typically be easier to negotiate this at the time of sale rather than at the end of your first term of the lease should the project timeline be extended.
In conclusion, there are a number of things to consider to ensure the best resale value for your existing commercial property and a smooth transition into your new property. If you are in the early stages of considering building a commercial or industrial building, feel free to get in touch with our friendly team of experts who are more than happy to offer some advice. Otherwise, the following resources may also be helpful: