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Commercial real estate 101

What is commercial real estate? It’s likely the vast majority of the public does not recognize the difference between commercial real estate versus residential real estate. Venture Commercial of Venture Realty Corp is here to help break it down.

Simply put, “commercial” in the context of commercial real estate, or CRE, refers to the activities of commerce or business, typically with the intention of making a profit. This differs from residential real estate, which in most cases involve transactions with individuals or families looking for a home or living space.

Commercial real estate transactions have a lot of moving and involve a variety of client types and asset classes. The clients may include investors, developers, tenants, landlords, local/national/international companies, franchises, non-profit organizations and corporations of all sizes.

The asset classes refer to the different categories or types of properties involved in commercial real estate. Type of construction, zoning, business use, location/exposure and development potential are just some of the ways these asset classes are distinguished. The most predominant asset classes in commercial real estate include investment, retail, office, industrial, land, mixed-use and multi-family. Each asset class has its unique characteristics, risk profiles and market dynamics, which can influence investment strategies, management approaches and financial returns.

Ready to dig a little deeper? Commercial Real Estate also differs in the following ways:

Purpose: Commercial real estate is used for business and/or investment activities. Example: a franchisee looking for an ideal location to open a Chopped Leaf or an investor searching for industrial zoned land to develop an industrial complex to lease.

Leasing: Leasing a commercial space is a popular alternative over purchasing due to factors like the high costs of purchasing properties, limited availability in the market and the desire for flexibility in accommodating growth. Commercial leasing involves various technical aspects depending on the asset class, including clauses related to tenant improvement allowances, options to renewal, fixturing and free rent periods, and common area and expense costs—just to name a few.

Lease Terms: Commercial leases are generally longer and have unique terms compared to residential. Each commercial lease agreement is tailored to the specific arrangement between a landlord and a tenant, and the terms can differ significantly.

Transaction Process: Commercial dispositions, acquisitions and lease negotiations commonly take more time than residential transactions. A CRE transaction can sometimes involve multiple weeks or months to come together. Conditional due diligence periods can span months and could involve environmental soil studies, development approvals, legal lease review and construction quotes for property improvements. These things take time.

Valuation: Commercial properties are valued based on a variety of approaches, including the utilization of capitalization rates, or CAP rates, while residential properties are most often valued based on comparable sales.

Market Conditions: Commercial real estate typically is more tied to economic indicators and business dynamics.

Property Management: Commercial properties commonly require more intricate management, including overseeing common areas, conflicting uses in multi-tenanted buildings, zoning issues, parking, signage bylaws and handling tenant relationships.

Representation: Commercial Realtors work with buyers and sellers. They are also extremely active in representing tenants and landlords in seeking, securing and negotiating commercial leases. This differs from residential, as only licensed property managers may work with tenants to secure a rental.

Due to the significant distinctions between commercial and residential real estate transactions, it is crucial to engage the services of a qualified Realtor for proper representation. Not all Realtors possess the same expertise and qualifications. When dealing in CRE, it is critical to secure a Realtor with a deep understanding of commercial real estate, in-depth experience of the asset class being considered, and has a proven track record. While all Realtors in B.C. go through the same licensing requirements, it’s important to recognize that some specialize exclusively in CRE, including the Realtors at Venture Commercial.

Venture Commercial, a division of Venture Realty Corp., was born from a vision to reimagine and elevate the practices of commercial real estate and give back to the community along the way. Its clients benefit from the expertise of a large commercial real estate brokerage and the collaborative, flexible and creative representation of a boutique real estate firm. The Venture Commercial office has collectively 90-plus years of commercial real estate experience in all asset classes.

The highly driven team is dedicated to building longstanding relationships and uncovering opportunities for its clients. As industry leaders, it guides its clients with expertise, wisdom, fairness and transparency every step of the way. Success is not the next commission; rather, it is defined by establishing partnerships throughout the complete life cycle of a client’s business.

Since formation at the start of COVID in March 2020, Venture Commercial has grown from an office of two to twelve, including three partners, two managing brokers, four associates, a senior associate, a marketing team lead and an executive assistant, with each team member bringing a wide variety of complementary skills to the brokerage.

Venture Commercial is deeply committed to giving back to its community. Every year, it actively engages in various initiatives and proudly support esteemed charities such as Kelowna Community Resources, Kelowna's Gospel Mission, CMHA Kelowna, Special Olympics BC and many others. Making a positive impact on the community is a core value it holds dear.

Venture Commercial is truly appreciative to represent key properties, developers and businesses. Spanning across the entire Okanagan Valley, from Osoyoos to Kamloops and throughout B.C., Venture Commercial offers commercial and investment real estate services including acquisitions and dispositions, leasing on behalf of landlords and tenants, property valuations and development planning.

Want to learn more? Visit Venture Commercial at its website here.

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