The industrial commercial real estate market in the greater Montreal has been improving and the aftershocks of the global recession are dissipating. Although the leasing marketing is still challenged, industrial property values have remained strong due to lower interest rates, cost of building new and lack of available properties for sale. It is a good time to consider selling your building. Here are some tested strategies to help you minimize your time on the market and maximize your selling price.
10 Steps to maximize the value of your industrial property
When selecting the professional that will represent your rights and help you sell your property, there are some keys attributes your real estate broker should have: Beware of the “jack-of-all-trades” broker, hire an industrial specialist; proven track record; experience with listing your type of building and the marketing plan to back it up; industry reputation (get references!); special training and designations reserved for top performers such as SIOR (Society of Industrial and Office Realtors).
Many sellers make the mistake at looking at their municipal evaluations to get an accurate value of their property. In fact, municipal evaluations are for taxation purposes only and should not be an indicator for value. These evaluations are based on a large number of criteria that may not be directly linked to your property.
Before you put your building on the market, ask your broker to explain some of the key terminology to you. When comparing buildings, purchasers will evaluate options on the following basis:
1. Price per square foot of building;
2. Building to land ratio;
3. Clear height (not ceiling height);
4. Percentage of finished office
Probably the most important step in the selling process. Using different analyses such as current and future market conditions, comparable sales, competitive properties, depreciated replacement cost, an accurate value range can be attributed to the property. As there is inevitable negotiation in real estate transactions, a seller should set his selling price slightly higher than the high value of the range. The biggest mistake a seller can make is over-pricing the property. This will discourage purchasers as they will not take the offering seriously. The property will remain stagnant on the market and typically will need to face a price reduction.
Pre-due diligence is the cornerstone to any effective and fast transaction. It minimizes any unforeseen issues for the seller and furthermore, will create a favorable negotiating position for the seller. It will minimize the chances of the purchaser trying to reduce the accepted price due to property irregularities. Pre-due diligence should include: conduct building inspection and environmental analysis; order a new certificate of location; verify zoning; review utility bills, floor plans & 2012 tax bills; verify servitudes; review of leases affecting the property, if applies.
A poorly maintained and dirty industrial building can be a deal killer. Before you launch your marketing program, make sure you take the necessary time to clean the shop/warehouse properly, remove all debris from exterior of property, replace broken or stained ceiling tiles and repair any leaks. A well-maintained building will give the purchaser a comfortable feeling that the seller has prudently maintained the building.
Unlike residential transactions which typically have inspection periods of several days, industrial transactions are subject to many criteria (financing, environmental, zoning) that can takes weeks and even months to complete. It is important that before you sign the offer to purchase that you know the history of your purchaser. Get a solid deposit and don’t be shy to ask questions about their business.
One of the most important steps in selling your building is understanding how the real estate market behaves. Examining comparable transactions is key (what are similar properties selling for?). However, this is a “rear-view mirror” approach to evaluating your property, you must also consider where the market is going. Other factors can greatly affect the industrial real estate market such as competitive products, interest rates, municipal incentive programs, employment, political decisions.
Unlike the residential real estate market, there are few sale cycles in industrial real estate. Once you have made the decision to sell your building and are prepared to do so, launching the marketing program quickly is key. Make sure your broker is equipped to launch in a maximum of 10 days to industrial users and other brokerage firms (no “pocket listings”!)
It is very rare that a Purchaser will offer the asking price for an industrial building. Often the first offer will be substantially below the seller’s expectations. Don’t take this personally. The seller is testing the waters. There are different negotiating strategies that can be employed to counter and price is not the only important factor in an offer.