Getting the Real Truth in Commercial Property Inspections

When looking at a new commercial or retail investment property for the first time, it is wise to have a checklist and system that assists you in the process. We have created this checklist to help get you on the right track. Inspecting the property is almost like having your due diligence process underway. Do not believe everything you see, and certainly investigate anything in question. Anything of importance that someone tells you about the property should be investigated.

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The only way to inspect investment property is to have a keen eye for detail and a diligent record-keeping process as you walk around. It is remarkable how these records have to be revisited later for reassessment. Let’s consider some basic issues to review in your property inspection process.

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1. Before starting, a copy of the land title records is fundamental to your inspection. As part of this process, seek a copy of the survey records and any existing leases or licenses. Also, seek out any unregistered interests that may not appear on the title to the property. If in doubt, seek a good property solicitor to help.
2. Understand the location of the property boundaries and look for the survey pegs relevant to the survey plan. If in doubt, seek a good surveyor.
3. Many easements, encumbrances, and other registered interests must be fully investigated within the property land title. These interests can impact the property’s price at the time of sale and the method of lease occupancy. If any registered interests exist on the property title, a copy of the relevant documentation is the first stage of the investigation, which questions should then follow.
4. Local council records may also impact the property. Are there any orders or notices that have been issued or are outstanding on the property, and can the potential investor be concerned about these concerns?
5. The zoning of the property and zoning activity or changes in the precinct can impact it. As part of this process, it is wise to include and inspect neighboring properties to ensure they have little or no effect on your subject property.
6. Copies of the local town plan will help you understand current planning issues. Discussing these with the local planning office or planning officer can put you on the right track and explain any problems or matters that may arise. In this process, it is wise to keep records of the discussions and the findings.
7. If a copy of lease documentation is available for neighboring properties, seek it out and review it. Knowing what the neighboring tenants are doing and how long they will be there is always good.
8. The local topography and plans across the immediate area will help you understand the land’s fall and the impact of any slopes and natural drainage. Look at the location of any watercourses and flood plains. Seek out the history of any flooding in the area.
9. The supply of electricity into and across the area should be understood. If your property is industrial, then the energy supply to the property will be strategically important to any industrial tenant. If any easements or encumbrances exist across the property for electricity, seek to understand the rights and obligations these documents create for the property owner.
10. Services and amenities for the investment property will impact future operations and the business community’s interest. The question is whether these services and amenities are well maintained and what their nature is.
11. Look for changes in road and transport corridors that impact the property or region. Any change inroads can dramatically shift how property is used.
12. Look for the location of public transport and its potential to enhance your property function. Many businesses need stable and frequent public transport to help employees access their jobs.
13. Look at the region’s community and business demographics. The growth patterns for the last 5 to 10 years will help you understand the property’s future.
14. Other property valuers in the area are a good source of market intelligence. They can usually tell you the area’s history and current business sentiment. Rental levels, incentives, and sale prices per square meter are valuable elements of market intelligence. They will all impact the property’s yield to any property investor.
15. Look around the area to see how many other properties are currently available. Seek details of these properties and the prices being sought. If these properties have been on the market for a long time, it will give you an idea of how acceptable the regional prices and business sentiment are at your inspection.
16. Look around the area to see how many properties are currently vacant. Concerning each vacant property, get details of the rental sought and the time the property has been on the market. It would help if you judged whether these rentals are relevant and reasonable in the current marketplace.
17. An investigation into the supply and demand of vacant space by property category has been undertaken in the region. You want to know exactly how much space is coming into the market in the future and how much space exists now for tenants to occupy.
18. Check out any new property developments in the early stages of consideration and development approval. The key question is the impact these properties may have on your property.
19. The history of the area is always of high value to you. In commercial, industrial, and retail investment property, the history you are after is the last five years. It is remarkable how much information you can glean from regional property sales and rental trends. Given that commercial and retail investment property works on the cycle of rising and falling, history can open up your understanding of what’s been going on and where things are headed.
20. With any property investigation, particularly with complex and large properties, it is wise to seek out the comments of architects and engineers. What you need them to do here is a comment on the property’s structural integrity and its future usable life. Also, identify how the property may be expanded or refurbished when required.
21. Chase down the tenancy schedules for other properties in the area. While these are not always easily obtained, they are of high value. They will tell you much about the activity in different properties and buildings that may impact your future leasing strategy or property sale. When trying to lease, you do not want a significantly high vacancy factor near your property.
22. Review the local precinct for the larger businesses and how they operate. This will help you understand who the major business players and employers are. Having these companies in the area is good, but losing them can threaten the region. We call this the business stability factor. It should form part of your investment property assessment for the future.
23. Please review the other major tenancies in the area and see how they operate. Depending on their operation and the times of day, they can stress or enhance the area. A prime example is a transport company that has vehicle access peaks at certain times of the day. This can challenge the other businesses in the area and how they operate.
24. Walk around the precinct and the property, taking photographs for later investigation. It is surprising how useful photographs have become for assessing property inspections. Walking through the streets in the region allows you to feel for the streets’ function and the neighboring properties. It puts you in the greater perspective of the services and amenities and all local surrounding businesses’ functions. A tip in keeping digital photographs for later evidence is reversing the important photos to ‘gif’ type files. Therefore, this format is not easily changed and is more stable as court evidence of critical matters.
25. Knock on the doors of other local businesses and talk to them about how things operate locally for them. Other tenants and businesses in the region will tell you a lot and put you on track for challenges and problems.