Lake Forest, CA, is part of Orange County. At the 2010 census, its population stood at 77,264. On December 20, 1991, it was incorporated as a city. Before that, it was a community known as El Toro. In 2000, a vote determined that its city limits should be extended to include Portola Hills and Foothill Ranch planned developments. As a result, new residential properties and commercial centers were brought into the city’s boundaries. Lake Forest is one of our country’s safest cities, which is why it is popular for residential homes.
The name of the city comes from the two lakes that are found there. Both are man made and there are numerous custom homes and condominiums around the shores. The Lake Forest Beach and Tennis Club and the Sun and Sail Club, are managed by neighborhood associations. In these facilities, residents can enjoy club houses for social events, hot tubes, saunas, multiple swimming pools, volleyball courts, barbecue pits, basketball courts, gyms, tennis courts, and more.
Meanwhile, it is also home to a forest between the Serrano, Jeronimo, Ridge Route, and Lake Forest roads. This is a eucalyptus tree forest, which is also man made. It was created by Dwight Whiting, a local landowner, in the first decade of the 20th century. He planted 400 acres of eucalyptus trees to support his lumber operations and in an effort to attract new developments. Some five decades later, the Occidental Petroleum company created its first developed community around the forest, which by then far exceeded the original 400 acres.
In terms of its economy, Lake Forest is home to a number of prominent organizations. These include Oakley, Inc., the eye wear manufacturer, and also Kaiser Aluminum, Panasonic Avionics, Karem Aircraft, Greenlight Wireless Corp., Barbeques Galor, Del Taco, Johnny Rockets, Apria Healthcare, Sole Technology, Inc., Tilly’s, and Etnies. Additionally, the Eagle Community Credit Union has its headquarters there, serving all of Orange County’s postal and federal employees. What Lake Forest is best known for, however, is Saddleback Church, the famous megachurch started by Rick Warren. It is the eighth biggest in the country.
Lake Forest Commercial Buildings for Sale & Lease – Which One Should You Choose?
There are two main options available for people interested in commercial real estate (CRE) in Lake Forest, which is to either purchase it, or lease it. Purchasing is mainly interesting for property investors, although businesses could also consider it. That said, the majority of businesses, and particularly small businesses, will choose to lease a property instead. Because purchasing a CRE generally means having to put 30% of the price down, very few businesses are able to afford it.
It is very important to understand the different pros and cons associated with commercial buildings for sale & lease before you make a decision. This goes above and beyond looking at what each options costs. There are many other factors of importance as well.
Lake Forest Commercial Property for Sale – Trends in Lake Forest
One place to start when comparing your options, whether you want to run a business or make an investment, is in CRE trends. For Lake Forest:
Lake Forest Commercial Property for Lease – How to Find One
Instead of going for a commercial property for sale, getting a lease is often the only option available to new businesses. Because CRE properties are generally quite large in size, they tend to also be very expensive. This means they require an amount of capital that they simply do not have, or cannot afford to tie up into a mortgage. Hence, they would go for a commercial property for lease instead.
You Need a Team of Professionals
To find a good property, you need to build a team of professionals around you, with the first being a CRE broker. There are leasing agents, who work on behalf of the landlord, and tenant brokers, who work on your behalf. Since landlords generally pay for their fees, they will push you towards a leasing agent, but a tenant broker will better serve your personal needs. Generally speaking, they will ask you to sign a representation agreement, however, which means you cannot go to any other broker until you have found what you are looking for.
Besides a broker, you should also hire a lawyer and a financial advisor. Put together, they will be able to assess and review the contract that a prospective landlord offers you, negotiating on different points in order to get you the best possible deal. Very often a landlord will hope that you will not negotiate at all, which means they will provide you with a contract that is heavily skewed in their favor. By employing a broker, a lawyer, and a financial expert, however, you can make sure that you get a much better deal. Because you are tied in to a lease for a significant period of time, this is for your own protection.
Issues to Negotiate
- The length and extent of your personal guarantee
- How much you have to pay each month for the lease, and what that is based on
- The type of lease 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 is the maximum allowable rent
- Where the responsibility for maintenance will lie
- To what extent you are able to change the inside of the building and who will pay for 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 security deposit required
What the above show is just how complex a lease contract actually is, and how important it is to have the right kind of experts working on your side. Naturally, should you decide to purchase, the list above is virtually irrelevant, as you will be able to do with the property as you see fit. That said, you may then become a landlord, and that means you will also have to negotiate on the points above, only from the opposite perspective.
Investing in Commercial Buildings for Sale & Lease
A CRE property is always an excellent investment. No matter what happens to the economy, there is always a need for retail, industrial, and commercial property. This means that the value remains pretty stable in times of economic unrest, and that it rises significantly during times of economic strength. As a result, these properties are interesting not just for investors, but also for small businesses. After all, should their business go under, they will still have that investment in their portfolio, which they could then choose to lease themselves.
Pros and Cons
When you do purchase CRE, you are limited by the county’s zoning ordinances, however. This means that only certain types of industries can run in certain geographical areas. This is generally not so much a problem, but coming up with the 30% deposit usually required to be eligible for a mortgage is. Luckily, you can also choose to invest in a commercial real estate investment trust (REIT). While this means you don’t own a property in full, and that you therefore cannot run your own business in it, it does mean that you can reap the rewards of investing in CREs.
Conclusion
Clearly, there are a lot of things to take into consideration when comparing leases to purchases for a CRE property. This is a decision you should not take lightly, but one that you should properly explore with the advice of experts. In so doing, you will better understand your personal needs and how they can best be met. Take your time and don’t rush into a decision because, either way, you will be tied to it for a long period of time.