Orange County, CA is home to Rancho Santa Margarita, which is one of the youngest cities in the county. The community is master planned and situated on beautiful rolling hills. At the 2010 census, it was home to 47,853 people, which represents a small increase since the previous census in 2000. The city is named after Rancho Santa Margarita y Las Flores, which is actually in San Diego County. However, it still falls within the Rancho Mission Viejo borders, which is why it is part of Orange County instead.
Employment rates are high in Rancho Santa Margarita. The city’s top employers include Applied Medical, O’Connell Landscape Maintenance, the Saddleback Valley Unified School District, Lucas & Mercier Construction, Control Components Inc., Target, Car Sound Exhaust System, the Capistrano Unified School District, the Santa Margarita Catholic High School, and the Professional Association of Diving Instructors.
Rancho Santa Margarita Commercial Buildings for Sale & Lease
The Rancho Santa Margarita economy is very strong and there is a significant interest in commercial real estate (CRE). This is true for investors, who want to purchase commercial buildings for sale & lease, and for businesses who want to operate out of it. The latter category can choose between leasing and purchasing, which is a very complex decision. We are conditioned to believe that we should always choose the option that costs the least per month, but this is not quite the case when it comes to comparing leasing and purchasing.
There are a few other things to consider as well, including:
- CRE may be unaffordable to purchase because of the fact that a 30% deposit has to be raised, money that might be better used to grow a business
- Both options have different tax advantages
- Both options have different associated costs
- Purchasing means that you invest not just in a business, but also in CRE
- Leasing means that you can move your business with far greater ease if the need arises
It is important, therefore, that you carefully consider what your various options actually are before you come to a decision on whether you should lease or purchase.
Rancho Santa Margarita Commercial Property for Sale
One place to start with comparing your options, whether you want to run a business or make an investment, is in the CRE trends. For Rancho Santa Margarita:
- Multifamily properties in the county usually cost around $314,841.90, which is a 0.7% increase during 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 decrease of 0.2%, but for one year it represents a 11.3% rise. If you own office space, you can usually charge a yearly rent of $24.10 per square foot in Rancho Santa Margarita, which is a 2.5% increase over the past three months, and a 5.1% increase over the past year. Those prices are lower than the county and metro area, but higher than the state average.
- 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 not moved over the past quarter, but in terms of one year, this is a 14.5% rise.
Rancho Santa Margarita Commercial Property for Lease
Because of the cost of CRE, and the aforementioned fact that you have to pay 30% as down in order to get a mortgage, many businesses have no option other than to lease. However, just because the lease is the only viable option doesn’t mean that they don’t have a lot of things to think about. If you are in this situation, then you can start by establishing an overview of what your personal needs, requirements, and capabilities are. It is best to discuss these issues with an accountant.
Look for a Reliable Broker
Once you know what you want and can afford, you need to find a broker to help you find the property of your dreams. Broker fees are generally paid for by the landlord, which is a great benefit to you. You can choose to work with a leasing agent, who works mainly for the landlord, but you can work with multiple ones. Alternatively, you can find a tenant broker, who works mainly for you, but who will usually ask you to sign a representation agreement, which means you can only work with one broker. Again, you need to consider the pros and cons of both options before coming to a decision.
Negotiate the Lease
Once you have a broker, and a property has been identified, it will be time to negotiate on your lease agreement. A lot of people don’t know that these agreements are negotiable. This is because they only have experience with tenancy agreements, which are set in stone. Because quite a few points on your lease agreement can be negotiated so that the contract is more in your favor, you should also enlist the services of an attorney. This will ensure that everything follows the necessary rules and regulations. Make sure, as well, that you let your accountant look over the contract as well, as they are able to determine what the financial viability of the contract and your proposed changes actually are.
Some of the issues that should be negotiated in your favor include:
- The length and extent of your personal guarantee
- How much you have to pay each month for the lease, and what that would be based on
- The type of lease that is most beneficial to you, whether it is a percentage lease, net lease, triple net lease, or gross lease
- The duration of your lease and what happens when it is terminated
- The possible rent increases, what they are linked to, and how much is the maximum allowable increase
- Who is responsible for maintenance
- To what extent you are able to change the inside of the building and who will carry the load for those 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 the need arise to terminate the lease before its time
- 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
As you can see, there are many highly complex issues to take into consideration when you decide to go for a commercial property for lease. It is a decision not to be taken lightly, and you have to work hard to make sure that the contract is in your favor. Most leases are lengthy contracts and they are difficult to get out of, so you have to be very sure that you are able to afford it for as long as you need to. This is another major difference between a CRE lease contract and a residential property tenancy agreement. Tenancy agreements can generally be cancelled by giving between one and four weeks’ notice, but a lease agreement often cannot be cancelled at all.
What About Purchasing a Commercial Property for Sale?
None of the issues above are of concern to you should you purchase the CRE property. That is, unless you purchase it to become a landlord yourself, which means you have to go through the exact same process, but now from the perspective of a landlord. You do also have to consider zoning issues, which means that only specific types of businesses are able to operate out of specific geographical areas. Unfortunately, purchasing CRE can be very difficult due to the 30% deposit you have to be able to come up with. As a result, very few businesses actually ever purchase CRE, choosing to lease instead. This is despite the official financial advise being that those who intended to run a business for more than seven years should always attempt to get a mortgage.
CRE as an Investment
CRE is a strong, solid investment, with little risks and high yields. As a result, they are also very interesting for commercial real estate investment trusts (REITs). By investing in a REIT, all the complex issues of buying, owning, and managing CRE are in the hands of the REIT, and not yours. The downside, however, is that you can never really touch and enter the property that you have purchased, as you really only own a proportion of it.
Running a business in Rancho Santa Margarita is a great idea. There is a huge demand for many types of industries, and further construction continues to take place for even further improvements. Hence, starting a business or investing in commercial real estate there is generally a good idea that brings about big results. However, it is not a decision to be taken lightly, and you must take the time to truly compare all the issues that are associated with both financial constructions. Remember to consulting with your team of professionals before you move anything further forward.