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Orange County Legal Blog

Are you prepared to close your commercial real estate deal?

Searching for and buying commercial real estate is exciting, stressful and complicated all at the same time. And that doesn't even take into consideration what could go wrong when you finally reach the closing table.

The way you prepare to close on a commercial real estate deal is critical to your success. With the right details in place, as well as a strategy to guide you, you'll feel confident in your ability to proceed.

Consider the load factor when negotiating a commercial lease

After finding the right retail space, a potential tenant will then enter into the negotiations with the landlord. The reason that it is important to negotiate the terms of a commercial lease is that rent is not based on just the square footage of the space. Orange County entrepreneurs may want to make sure they consider the load factor before signing anything.

Commercial tenants often have the use of certain common areas in addition to the retail space. The load factor is a way to calculate the total amount of rent they will actually pay. There is a difference between the usable space rented and the rentable space. The usable space is the square footage the tenant will actually occupy. Even if the tenant does not use all the space, it is still space only available to the tenant.

The issues developers consider when it comes to real estate

The price of real estate and its value after purchase often depends on a variety of factors whether it is here in California or elsewhere. For this reason, many developers keep up to date on current events, financial trends and more. Some foresight and research could help identify the factors that could influence commercial real estate in the near and distant futures.

For instance, it is obvious that the health of the economy, interest rates and taxes all affect the value of real estate and influence how it will perform in the future. The political climate often influences these factors, so it would be wise to keep an eye on this arena as well. Even though politics is something that people say to avoid discussing, it has a place in many industries, including real estate.

A commercial tenant doesn't have to renew under the same terms

Finding the right retail space here in Orange County can take a long time. Once a commercial tenant finds it, a lease is signed for a specified period of time after negotiating its terms. One of those terms may have been the option to renew.

Some commercial tenants believe that the option to renew means signing a new lease with the same terms as before. However, that is not always the case. When it comes to commercial leases, nearly everything can be negotiated, and that includes the terms of a renewal lease.

How do developers choose a leasing firm for a project?

Finding the right tenants for a project is not always an easy task. For this reason, many Orange County developers choose to work with a leasing firm to help. Finding the right company could make the difference when it comes to signing up quality tenants both during and after the construction process.

It is important to find a leasing firm that knows the development's market and property. Strategies often vary depending on whether the project is office, retail or industrial space. It might make more sense to enlist the aid of a company who has at least one person with specialized experience in a particular market and with a particular type of property. The ability to work with one company with a variety of experience often makes it easier for the property owner.

Environmental laws can frustrate California developers

California is a beautiful state in which to live, in no small part due to the temperate climate and rugged and pristine natural landscapes. But these same desirable elements can make a commercial real estate developer's plans challenging to achieve.

Many developers' plans are stymied by the provisions of the California Environmental Quality Act (CEQA).

Looking for retail space takes some consideration -- and math

Opening a traditional brick and mortar business anywhere, including here in Orange County, requires some consideration and math. The last thing a new retail business needs is to get the wrong size space, which could ultimately cut into any profits a company could make. Too large a space could cost more in rent while too small a space could prevent additional sales.

In addition to the monetary issues associated with the space, a new owner has other considerations as well. If the space is too small, customers may only see clutter and not be able to enjoy all of its wares. If the space is too large, it will look empty to customers, which could turn them away.

Developers may consider using mediation for real estate disputes

Not every project goes smoothly. Orange County developers could encounter obstacles to the completion of their projects due to some sort of dispute. While the knee jerk reaction may be to file a lawsuit, the situation may be better handled through the use of mediation.

Unless there are complex legal issues surrounding the property or allegations of criminal conduct, keeping the matter out of court could be the most advantageous way to move forward. More than likely, the parties involved need to try to maintain some form of working relationship, and doing so would probably have a greater chance through mediation than litigation. For this reason, choosing mediation could prove useful.

Don't forget how a development can affect traffic in the area

Anyone who has lived here in Orange County for any length of time knows that the traffic can be heavy and chaotic. Bumper-to-bumper travel is more the norm than anyone would ever like to admit. When planning a new development in the area, how it will affect already congested traffic patterns is often one obstacle that requires addressing before moving forward.

One California city recently had to scrutinize how a potential new development would affect the traffic in the area. The plan is to demolish a closed Denny's restaurant and build a multi-tenant, single story building in its place. Doing so would presumably increase the traffic in the area. The conversation about this topic alone took hours before the planning commission authorized the developer to move forward.

The difference between a commercial and residential development

When Orange County entrepreneurs decide to get into real estate, they may find themselves deciding between residential and commercial property. Understanding the differences between the two could help make the decision. The disparities in how such a development would be handled could affect the bottom line for these entrepreneurs.

Commercial property is most often comprised of retail establishments, restaurants and office buildings, just to name a few. Obviously, this is different from residential property, but the variations do not stop there. Commercial tenants can negotiate their leases, including tenant improvements more often than a residential tenant. Customizing the space for a particular potential tenant's needs is part of the leasing process for commercial properties but not often for residential ones.