Newport Beach is found on the coastline of Orange County, CA. In 2010, it had a population of some 85,287 people. It is famous for Newport Harbor, which is found within its city borders. Newport Beach is very affluent, with both property values and median family incomes ranking among the highest in the country. In fact, according to the Daily Pilot, a Costa Mesa newspaper that covers all of the Newport-Mesa area, at least 25% of households in Newport Beach earn $200,000 or more per year, and that property values have a median value of $1 million or more. This ranks the house prices in the city as 8th in the entire country, according to a survey in 2009. On a side note, Newport Beach is the most Republican city in the state.
Insurance company Pacific Life, which is a Fortune 500 company, is based in Newport Beach. Other notable companies found in the city include Conexant, Acacia Research, PIMCO, Jazz Semiconductor, and Galardi Group (Tastee-Freez, The Original Hamburger Stand, and Wienerschnitzel). Furthermore, the world’s largest Mercedes-Benz dealership, Fletcher Hones Motor Cars, is also based there. Now dissolved, Air California used to have its headquarters there as well. Stradling Yocca Carlson & Rauth is the largest law firm in the city, employing 75 attorneys. They are based in Fashion Island. Calty Design Research, which is a design center for Toyota, is also based in Newport Beach, and they are known for having designed the Celica’s 2nd, 5th, and 7th generations’ exteriors, as well as some Scion and Lexus models.
Newport Beach Commercial Buildings for Sale & Lease – Which One Should You Choose?
The economy of Newport Beach, clearly, is very strong. If this is something you would want to become involved in, then there are a number of options available to you. Property investors, for instance, could decide to purchase one of the commercial buildings for sale & lease. Business owners, meanwhile, can choose to either to purchase this type of real estate or they can lease it. There are advantages and disadvantages for both options and it is important to take all of those into consideration before deciding which one to go for.
With property prices being high in Newport Beach, most business owners choose to lease rather than purchase when it comes to commercial buildings for sale & lease. While their monthly payments for a lease may be higher than those for a mortgage, they often do not have the financial capabilities to purchase, not in the least because a significant down payment is usually required.
Newport Beach Commercial Property for Sale – Trends in Newport Beach
One place to start when choosing whether to go for a commercial property for sale, whether you want to run a business or make an investment, is in CRE trends. For Newport Beach, those are:
- 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 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 $36.47 per square foot in Newport Beach, which is a 0.6% increase over the past three months, and a 17.2% increase over the past year. Those prices are higher than 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%.
- Retail properties 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.
Newport Beach Commercial Property for Lease – How To Do It
The majority of new businesses in Newport Beach will choose to lease commercial real estate properties. The prices are simply too high for startups to raise the necessary capital. However, a lease is also a complex financial construction that has to be approached in the right way, starting with finding a property.
Look for a Tenant Broker
Unlike residential real estate, commercial property for lease is generally not listed in an easy to find manner, and this means you may require the services of a broker. In almost all cases, broker fees are paid for by the property owner, which is why you should try to find a tenant broker (who works for your best interests), rather than a leasing agent (who works for the owner’s best interests). Besides helping you to find a commercial property for lease, a tenant broker can also help you to negotiate on the terms and conditions of your lease. This is very important, because property owners are likely to first offer you a deal that is heavily in their favor, in the hopes that you will not negotiate.
Get a Team of Professionals
Aside from a broker, you should also have a team of other professionals on your side. This includes a lawyer, who can ensure your legal interests are properly represented, and a financial advisor or accountant. Put together, they can help you to get the best possible deal. They will focus on important issues, such as:
- How long your personal guarantee has to be in place, and to what extent
- The price of your monthly lease, and that this is based on usable space within the property
- The type of lease that is offered to you, which could be a gross lease, a net lease, a triple net lease, or a percentage lease
- How long your lease will be in place, and under what circumstances you will be able to extend it
- How often your landlord can increase your rent, which consumer index such an increase would be based on, and the cap
- Who will be responsible for the maintenance of the property
- How many changes you can make inside the property, and who will pay for these. For instance, landlords will usually pay for renovations and give a discount on the monthly lease amount while they take place, but only if you sign a lengthy lease.
- How you are able to signpost to your business on the outside of the building, which can be important if you are in a listed or historical building
- Whether there is a possibility to sublease the property if your business contracts before the lease term is up, or if you were to completely go out of business
- Whether the lease can be transferred to the new owner if you were to sell your business
- Whether there are clauses for co-tenancy or exclusive use
- The amount of security deposit
As you can see, it is of vital importance to have a team of experts on your side to make sure you will be able to get a good deal. Lease contracts are highly complex constructions, and they are lengthy contracts so you don’t want to be tied in to a bad one. Now, if you were to decide to purchase instead, the above list is not of any importance. The property will be yours to do with as you please. You can sell it, sublease it, renovate it, change it, and more – although you may be tied to zoning regulations. However, it also means you need to be able to put down around 30% of the value of the property if you are to get a mortgage.
Benefits of Investing in Commercial Real Estate in Newport Beach
Commercial real estate is a very good investment. This is because economies thrive on commerce, even if it is going through a dip. The economy of our country is driven to a large extent by shopping and manufacturing, which means that investing in these sectors is always a good idea, presenting very little risk. Additionally, if you were to purchase real estate to run your own business, but your business is not successful, it is quite easy to become a landlord instead so that you can continue to earn an income or at least meet the repayments on your mortgage.
Importance of a REIT
In Newport Beach, property prices are so high that it is rare for small businesses to be able to purchase a full property. In fact, even investors generally struggle to raise sufficient capital. Fortunately, there is the option of investing in a commercial real estate investment trust or REIT. This is a construction that enables you to invest in properties and get the benefits of being an investor, but without the headache of having to be a landlord. On the other hand, investing in a REIT means that you do not have any control over how the property is being used, nor will you ever be able to run your own business in it.
Conclusion
Clearly, there are a lot of things to consider in terms of whether you should buy or lease when going for commercial property for sale & lease. This is a decision you should not make lightly, and you must speak to a number of professionals in order to get solid financial and legal advice. In so doing, you will be able to identify the best possible solution.