Irvine is one of the wealthiest cities in Orange County, CA. As a planned city, it was developed in the 1960s by the Irvine company. The city was incorporated on December 28, 1971, and some 258,386 people now live there. Irvine’s economy is based on semiconductors and technology, and there are various prominent companies in these sectors that have their headquarters there. Furthermore, there is a strong educational sector, with the city being home to Webster University, the Fashion Institute of Design and Merchandising, Kaplan International Colleges, Alliant International University, Pepperdine University, the University of La Verne, California State University Fullerton campuses, Stanbridge College campuses, California Southern University, Brandman University, the University of Southern California’s Orange County Center, Irvine Valley College, Concordia University, and the University of California, Irvine.
Irvine also thrives on tourism, which the Chamber of Commerce runs though its Destination Irvine program. This program demonstrates that Irvine is a good vacation destination, but also that it is interesting for business initiatives such as meetings and events. It is also one of the best cities in the country for startup businesses due to the fact that its economy is growing so quickly. The tourism industry, meanwhile, is mainly driven by the film projects that take place here. Filming permits are granted either for free or at very low costs.
Irvine Commercial Buildings for Sale & Lease
Irvine’s economy is incredibly strong and attractive, and this makes it a good place to start a business in, or to invest in property. Commercial real estate (CRE) is a popular investment sector there, not just for those who want to become landlords, but also for those who want to run their own business. If you fall in the latter category, then you can choose between buying or leasing a property. Both options have their own advantages and disadvantages, which means you have to do some homework in order to determine what is right for you. While it is usually recommended for businesses who intend to stay in the same location for seven years or more to purchase their CRE, this may not always be possible.
When choosing to go for commercial buildings for sale & lease, you need to go beyond simply considering the monthly payment you make either in rent or towards a mortgage. Both options come with particular tax advantages, have associated costs, require either a security deposit or a down payment, have limitations in terms of how the buildings can be used, and more. As such, it is advisable to speak to a financial advisor or broker who specializes in CRE to help you find the option most suited to your personal needs.
Irvine Commercial Property for Sale
If you want to compare the options that are available to you with regards to commercial property for sale, then the following statistics and trends relating to Irvine specifically, or Orange County in general, may be of interest to you.
- Multifamily properties in the county usually cost around $314,841.90, which is a 0.7% rise compared to the last three months, and a year on year 10.5% rise.
- 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 rise. If you own office space, you can usually charge a yearly rent of $29.36 per square foot in Irvine, which is a 1.9% increase over the past three months, and a 7.1% increase over the past year. Those prices are higher than in the county, metro, and state areas.
- 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%. If you own industrial property, you can usually charge rent of $15.17 per square foot per year in Irvine, which is a 2.5% increase over the past three months and an 7.5% increase over the past year. That price is higher than in the county, metro, and state areas.
- Retail properties in the county usually cost around $408.88 per square foot, which has been stagnant over the past quarter. Year on year, however, this is a 14.5% rise.
Irvine Commercial Property for Lease
The vast majority of businesses, with the exception of large chains, will opt for a commercial property for lease if they want to move their operations to Irvine. Irvine is particularly attractive for startup businesses, and they usually do not have the capital behind them yet to afford a down payment for the purchase of a property, as this would leave them with no or very little capital to build and grow their business. Hence, if you are a startup, it is likely that you will opt for the lease, which in turn means you should work with a broker. Do make sure you find a tenant broker, whose main concern is to get you a good deal. Leasing agents, by contrast, work for the landlord. Either way, the costs of the broker are usually covered by the landlord. The broker is someone who understands the market, knows what properties are available, and who can negotiate the best deal out of your contract.
Negotiating a contract is also incredibly important. Many landlords hope that prospective tenants do not know they have the right to negotiate, which means they end up accepting deals that are not favorable to them. If you have a good broker on your side, who will likely be asked to sign a representation agreement, but you can negotiate every element of your contract so that it becomes one that is suitable both for the landlord and for you as a tenant. Some of the issues that they will be able to negotiate for you include:
- How long you have to provide a personal guarantee and what this entails
- What your monthly lease price is, and what that price includes
- The type of lease that you will pay for (gross lease, net lease, triple net lease, or percentage lease)
- How long your lease will be, and what the arrangements are when that period ends
- How often and by how much the rent can increase, and according that what consumer price index
- Who will be responsible for maintenance and repairs
- How much you are able to renovate the property inside, and who will cover those costs
- How you can change the outside of the building to showcase your own business
- Whether there are possibilities for subleasing and what conditions are attached to that.
- The fees and penalties attached to any exit clauses should your business go under or you have other reasons to leave early
- Whether the lease can automatically be signed over to a new owner if you were to sell your business
- Whether there are any co-tenancy or exclusive use clauses
- Your security deposit
All of these issues are of major significance and they also demonstrate the complexity of leasing. These questions are irrelevant for anyone who purchases commercial real estate as the property becomes yours to do with as you please. That said, whether you lease or buy, you will always be affected by zoning regulations, which determine the type of business you can run out of a specific location.
Why Purchasing May Be Better
It is a known fact that CRE is a very good investment. Regardless of the overall economy, people still shop and this means products have to be manufactured, stored, or transported. As such, demand for all types of commercial properties remains high even if there is an economic downturn. This is one of the reasons why purchasing may be a better solution than leasing, not in the least because these properties usually grow in value.
How REITs Can Help
Unfortunately, however, to get a mortgage on a CRE, you will usually have to make a 30% down payment in order to get a mortgage. At present, there are no financial institutions that offer 100% mortgages on commercial properties. This means that these types of properties are often out of reach for everyday people, particularly those who are only interested in investing and not in running a business. However, a number of REITs (real estate investment trusts) now exist that do invest specifically in commercial properties. This is a really beneficial option if you want to invest, because it also means that you will not have the responsibilities of being a landlord on the properties that you invest in.
If you are considering either leasing a commercial property or buying one, there are plenty of things that you need to consider. This is a decision that you have to think about carefully, understanding the advantages and disadvantages of all the different options. With Irvine having such a strong economy, particularly for startup businesses, there are plenty of opportunities for those who are considering commercial real estate, and plenty of professionals who are able to help you make the right decision.