La Palma, in Orange County, CA, was home to 15,568 people as of the 2010 census, which makes it a reasonably small city. In fact, in the 10 years since the previous census in 2000, the population only grew by around 150 people. Yet, the city was ranked 31st in the “Best Places to Live” for small cities in this country in a 2013 poll was conducted by CNN’s Money Magazine. It should be noted, however, that in 2007, it was ranked 16th best place to live in the country. This is due to the fact that La Palma has a friendly, small, neighborhood vibe, the lowest police response time in the entire county, low crime rates, and excellent schools.
La Palma is very much a residential type of city. Its greatest employers are ADP, La Palma Intercommunity Hospital, BP West Coast Products, Unisource Worldwide, the Anaheim Union High School District, Performance Machine, Kellogg’s, Arcadia, Honeywell, and C&D Zodiac.
La Palma Commercial Buildings for Sale & Lease
The economy of La Palma is strong, with an average household income of $87,289, which represents a significant rise over the past 10 years. However, the majority of these people work outside of La Palma, although some home businesses do exist, as well as retail. As such, there are not many opportunities for those looking to invest in commercial real estate (CRE). Yet, they are not completely non-existent, and there are opportunities both for CRE purchases and leases if you know where to look. If you are a business owner, choosing between La Palma commercial buildings for sale & lease can be very confusing, not in the least because there are so many factors that must be taken into consideration.
The difference between a mortgage and a lease is much more than just the monthly amount that you have to pay towards each. Rather, you have to take into consideration the long term investment, the specific tax advantages and disadvantages, the costs associated with owning or leasing a property, and more. Hence, you must learn to understand the pros and cons of both options before deciding which one to go for.
La Palma Commercial Property for Sale
One place to start with comparing your options, whether you want to run a business or make an investment, is to look at the trends in La Palma commercial property for sale:
- Multifamily properties in Orange County usually cost around $314,841.90, which is a 0.7% rise compared to the last three months, and a year on year increase of 10.5%.
- Office properties in the county usually cost around $311.66 per square foot. This is a quarterly decline of 0.2%, although a 11.3% year on year increase.
- Industrial properties in the county usually cost around $222.13 per square foot, which equates to a quarterly rise of 2.7% and a year on year rise of 10.9%.
- Retail properties usually cost around $408.88 per square foot, which has been stagnant over the past quarter. Year on year, however, this represents a 14.5% rise.
La Palma Commercial Property for Lease
In a lot of cases, the sheer cost of purchasing CRE makes it impossible for business owners to buy it. If a company does have that type of capital behind them, they usually need it to grow their enterprise, and not to tie up in a lengthy mortgage. A La Palma commercial property for lease, therefore, becomes the only available option. This doesn’t mean, however, that you should simply accept the first opportunity that you come across, or not look at your options. Rather, you need to get a team of professionals around you to make sure you get the best possible deal.
Find Those Professionals Who Can Help You
This team should include at least a lawyer, to manage the legal issues; an accountant, to manage the financial issues; and a broker, to help you find the property in the first place. In almost all cases, broker fees are paid for by the property owner, but you still have two possible options to choose from:
- A leasing agent, who works mainly on behalf of the interests of the property owner, but you can hire multiple leasing agents to show you a greater variety of properties.
- A tenant broker, who works mainly on behalf of your best interests, but who is likely to ask you to sign a representation agreement, meaning you can only work with them. This could potentially limit the number of properties you can actually consider.
As you can see, even deciding how you will set out to find potential properties requires significant thought and consideration. One of the main factors you should use in choosing between the tenant broker and the leasing agent, however, is how much you trust in their negotiation skills. Residential tenancy agreements are usually non-negotiable, but this is not the case with a lease contract. As such, you need to make sure that your broker, your accountant, and your lawyer have an excellent understanding of your particular needs and capabilities, and that they are ready and willing to negotiate on your behalf.
What to Negotiate On
Leasing contracts are highly complex documents with a lot of specific points that can be discussed. Some of the issues to negotiate are:
- The length and extent of your personal guarantee
- How much you have to pay each month for the lease itself, and what that is based on
- The type of lease construct that is most beneficial to you (percentage lease, net lease, triple net lease, or gross lease)
- The duration of your lease and what happens when it comes to an end
- The possible rent increases, what they are linked to, and how much they are capped at
- Where the responsibility for maintenance will lie
- To what extent you are able to change the inside of the building and who will shoulder the renovation costs
- Whether you can signpost your store on the outside of the building
- Whether you can sublease the space and, if so, under what conditions
- What types of exit clauses are in place should you want to leave early
- Your right to transfer your lease if you were to sell your business to a third party
- Specific clauses, such as exclusive use or co-tenancy
- The amount of your security deposit
What this shows is how important it is to have knowledgeable, experienced people you can depend on. Lease documents are incredibly complex, and they do require experts to make sure they are in your favor. In many cases, the landlord hopes that you are not aware of the fact that you can negotiate, and that you will sign the first agreement, heavily skewed in their favor, without thinking about it.
The Purchase Option
Of course, should you wish to make a CRE purchase, the situation changes significantly. The majority of the above issues are no longer of influence. The property will be yours to do with as you please, and you can change it in any way you see fit, so long as you adhere to local ordinances, building codes, and so on. Furthermore, you can decide to sell it if you want to, sublease it and share the space, or lease out the entire property and become an investor. However, whether or not this is possible depends on your personal situation.
Commercial Real Estate as an Investment
It is a known fact that commercial real estate is a very good investment. Economy and commerce goes hand in hand, which means that, even in times of recession, demand remains high. While the value of properties may be hit to a certain degree, and you may struggle to find a tenant when the economy slumps, recovery tends to be quicker in those areas as well. Plus, if you were to have purchased a property to run your own business, only to find your business goes under, you have the opportunity to lease the property out, thereby continuing to secure your investment and own income.
There are some limitations with CRE, however, mainly around the issue of zoning. This means that certain properties can also be used for certain types of businesses. The biggest issue for most, however, is that you will have to find a 30% down payment if you are to get a mortgage, which are funds generally much above the average person’s capabilities. The alternative would be to invest in a commercial real estate investment trust (REIT). While this means you will never fully own a property, and therefore can’t use it for your business needs, or become a landlord, it does mean that you can enjoy the benefits of a growing investment, without the hassle of having to have tenants.
Clearly, there is much to think about in the world of CRE. You must take your time with this, determining the pros and cons of both leasing and purchasing for your personal situation. This is not something you should decide overnight, in other words. Make sure you speak with the professionals who support you, namely your accountant and your lawyer, in order to make sure that whatever you decide is in the best interest of your long term financial future.