Fountain Valley Commercial Real Estate for Sale & Lease

Fountain Valley is found in Orange County, CA and is a highly suburban city. At the 2010 census, the population was 55,313. It is known as a bedroom community, and very much a middle class area. Having a bedroom community status, the majority of working people living there actually work elsewhere. However, commercial centers are being established, particularly near the Southpark District near the Santa Ana River.

Once upon a time, the economy of Fountain Valley was very much agricultural. Now, very little of that is still remaining, with the exception of some small crops like strawberries. The fields are slowly but surely making way for office developments. This is also thanks to local policies that favor small businesses and the city is trying to attract more shoppers to its centers as well.

Additionally, Fountain Valley houses the Hyundai Motor America headquarters, as well as those of the D-Link Corporation, and of Surefire, LLC. At Southpark, meanwhile, you will find the Orange County Register, Satura, Starbucks, and D-Links. Additionally, you will find Ceridian and Noritz within the city, which is further testament that it is growing tremendously. In fact, one clear sign of the fact that there is tremendous commercial growth is that there are now huge bottlenecks on a near daily basis on the Fountain Valley San Diego (405) Freeway.

Fountain Valley Commercial Buildings for Sale & Lease

Because of this significant growth in commercialization and policies and regulations that favor small businesses, it will come as no surprise that many people are interested in commercial real estate (CRE) in the area. For some, this is because they want to become property investors and become landlords for other shop owners. Others want to open up their own business, and they look at commercial buildings for sale & lease.

As a broad rule of thumb, it is recommended that businesses who intend to stay in the same location for more than seven years should purchase their property rather than lease it. However, this is often not practical for a variety of reasons. For instance, they may want to be based in a specific shopping area that is owned in full by a property developer, so leasing is the only option. Another issue is that putting down a 30% down payment, which is usually required for a mortgage, is often not possible, particularly for startup businesses.

If you are considering whether you should buy or lease a CRE property in Fountain Valley, there are many things to think about. Whichever option you end up choosing, you will be tied to it for a lengthy period of time. This is why you should properly consider all the relevant pros and cons before agreeing to anything.

Fountain Valley Commercial Property for Sale

One way to start examining which option would be better, whether to go for a commercial property for sale or simply rent is to look at the CRE trends for Fountain Valley:

  • Multifamily properties in the county usually cost around $314,841.90, which represents a 0.7% rise compared to the last three months, and a year on year 10.5% increase.
  • Office properties in the county usually cost around $311.66 per square foot. This is a quarterly decrease of 0.2%, although it equates to a 11.3% year on year rise. If you own office space, you can usually charge a yearly rent of $19.20 per square foot in Fountain Valley, which is a 7.5% increase over the past three months, and a 20.8% increase over the past year. Those prices are lower than the county, metro, and state areas, and considering the significant growth over the past year, it is likely that prices will continue to rise to meet or even surpass those of the county, metro, and state.
  • Industrial properties in the county usually cost around $222.13 per square foot, which is a quarterly rise of 2.7% and a year on year increase of 10.9%.
  • Retail properties usually cost around $408.88 per square foot, and this did not change during the past quarter. However, based on a year on year basis, this is a 14.5% increase.

Fountain Valley Commercial Property for Lease – Some Tips

Presuming that you want to lease the property, which is what most small businesses and startups end up doing, there are many things to consider. Too many starting businesses in particular believe that there is very little difference between a CRE lease and a residential property tenancy agreement. This isn’t true, however. In fact, there are some very significant differences that you have to be aware of, not in the least because all of those points can be negotiated to be more favorable to your particular needs.

Get Together an Expert Team

The first thing you should do, before you even start looking for a commercial property for lease, is to get an expert team to help you. This team should include at the very least a lawyer (who can help with the legality of your contract), an accountant (who can calculate the financial feasibility of the proposal), and a broker (who can help you find a property). On the subject of brokers, it is customary for the landlord to pay their fees (this is something that the lawyer and accountant can negotiate for you should the landlord be reluctant). There are two types of brokers: the leasing agent, who works mainly on behalf of the landlord, and the tenant broker, who works mainly on your behalf. It is generally recommended, quite obviously, to work with a tenant broker. However, this does often mean that you also have to sign a representation agreement, something that you won’t have to do with a leasing agent. On the other hand, if you want to be able to see a wider selection of properties, then a leasing agent may be the better choice.

Issues to Negotiate

Once you have identified a property, the landlord will send you the preliminary leasing agreement. This is where the negotiating has to start, however, which is what your expert team can help you with. Some of the points that can be negotiated include:

  • The length and extent of your personal guarantee
  • How much you need to pay each month for the lease itself, and what that is based on
  • The kind of lease construction 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 based on, and how much is the maximum amount
  • Who would be responsible for the maintenance of the property
  • To what extent you are able to change the inside of the building and who will handle those renovation expenses
  • 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 terminate the lease prematurely
  • 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
  • How much is your security deposit

As you can see, leasing agreements are highly complex legal arrangements. They are generally also very lengthy, which is something else that sets them apart from tenancy agreements. They are often multiple pages in length, with various points that are being negotiated over very fiercely. The goal is that, eventually, an agreement is reached that is beneficial for both you and the landlord.

Purchasing a Commercial Property for Sale

The other option, naturally, is for you to purchase the property, in which none of the above will be of your concern, so long as you run your own business within the property. You may, however, be interested in making the purchase for the purpose of an investment. In fact, it can even be both – you can run a business out of CRE that you have bought as well as it being an investment. If, however, you buy it for investment purposes only, then you will likely become a landlord and the above list will once again become relevant, only from the opposite perspective.

Commercial real estate is a strong type of investment with high possible returns and very low risks. This is because commerce always continues, even in times of economic downturn. Even during the last financial crisis, which was the worst since the Great Depression of the 1930s, commercial real estate continued to be reasonably strong. Prices did drop, although not nearly as much as those of residential properties, and they were also the first to rise after the crisis, now far exceeding the price they cost before the crash.

Because of this, however, CRE is very expensive. And, in order to get a mortgage, you will have to put down at least 30% of the selling price, which is something that most people simply do not have. A good option is to join a commercial real estate investment trust (REIT) instead. This means that you can enjoy the gains of a CRE investment, without the hassle of being a landlord.