Commercial real estate holdings can be exceptionally valuable. Commercial properties often command a higher price per square foot than residential properties. They can increase in value substantially over time, especially if an area develops a reputation for being friendly to specific types of businesses.
In some cases, property previously used for manufacturing facilities or office space might be better suited for a different purpose. Owners and investors contemplating the redevelopment of existing properties generally need to be aware of the three challenges outlined below.
1. Zoning restrictions
The zoning of a property limits its use. A property previously zoned for warehouse purposes may require a zoning modification or variance if the owner wants to redevelop the property for retail use or to convert it into a multi-unit residential facility. Zoning changes can be particularly challenging for property owners to navigate.
2. Differing code requirements
The use of the building largely dictates what building code regulations apply. A single-tenant retail establishment has much different electrical and HVAC needs than a building occupied by multiple independent businesses or converted into residential dwelling units. Owners often have to invest substantially in upgrades when converting a building from one use to another.
3. Marketing challenges
The longer a particular building has housed a certain type of business, the harder it may be to overcome people’s perceptions of the neighborhood. Preemptive marketing that begins long before attempts to sell or rent out the renovated space can help increase the likelihood of success and change perspectives on the property.
Those hoping to redevelop an existing property often need guidance throughout that process. Property owners and investors with appropriate assistance can minimize setbacks and unexpected expenses through the advice and insights on commercial real estate regulations from an experienced legal professional.