What is Commercial Property?

Commercial property is real estate intended for use by for-profit businesses, such as office complexes, shopping malls, service stations and restaurants. Commercial property may be purchased outright by a developer for future projects or leased through a real estate broker. Commercial property falls somewhere between residential and industrial property.

Practically every incorporated city uses a zoning system to regulate the use of property within its jurisdiction. In order to grant permission to build a new office complex or other profit-making business, the city government must determine that the chosen area is indeed commercial property. The zones which separate industrial, residential and commercial property are clearly marked on city maps. If the proposed business is clearly in an area zoned for commercial use, then the city will allow the sale to proceed for the stated use. If any part of the commercial property extends into a residential or industrial zone, however, then the buyer must seek a 'variance', special permission to cross over a zone boundary.

Commercial property can be held by real estate agents who treat it the same as residential property. Signs advertising the availability and size of the commercial property can be erected, and arrangements can be made to buy or lease smaller lots. Sellers of commercial property may also agree to make improvements to the land, such as grading off uneven spots or clearing out unwanted trees. A professional developer may purchase huge swatches of commercial property simply to guarantee its availability for later projects.

Cities often use zoning laws to prevent conflicts between residential homeowners and businesses. Land designated as commercial property is rarely located in the middle of residential zones. City planners encourage commercial businesses to congregate along busier streets and central downtown areas. This helps to keep traffic to these sites manageable. Some areas of the city may be designated for 'mixed usage', which means some commercial property may be used for residential purposes. A quaint downtown shopping area with apartments would be an example of mixed usage.

Commercial property definitions may include industrial usage as well, although zoning laws still regulate the level of industry permitted. Heavier industries often purchase property on the fringes of cities or in unincorporated areas. Some commercial property zones in the city do allow for light industrial usage, usually smaller factories with minimal emissions and transportation needs.

Commercial Property Broker

• Experience is not usually required but will increase an individual's chances to become a commercial mortgage broker. Individuals seeking experience should apply as an assistant at brokerage firms that has a commercial mortgage division.
• An individual in this position acts as a liaison between financial institutions and individuals seeking mortgage loans to finance commercial property. Mortgage brokers sell loans to their clients and often work with multiple financial institutions, allowing a wider array of borrowing options.

What Is Commercial Property Insurance?

A commercial property insurance policy covers the physical property of the insured company. This includes the property itself as well as equipment and building contents that are owned by the company. The fine print of the insurance policy defines the specific coverages and the type of damage that is covered, which might include fire, theft and natural disasters.

The commercial insurance policy works much like a homeowner's property insurance policy. The business pays the premium to have the policy in place after an insurance underwriter evaluates the application. If a covered incident of damage occurs to a piece of covered property or equipment, a claim is filed with the insurance company. A claims adjuster assesses the claim to make sure that it falls under the scope of the commercial property policy before the insured business receives compensation for the damage.

A commercial property insurance policy might cover specific damages, such as fire, if it is a named peril policy. A broad coverage policy covers damages regardless of the cause, other than what is specifically listed as not being covered. The broad coverage policy costs more but offers more comprehensive coverage for the business.

A commercial property insurance policyholder has the option of adding more coverages to the base policy, depending on the business's specific needs. For example, boiler and machinery insurance covers accidental damage to boilers, equipment and machinery. Debris removal coverage pays for removing the debris left from a covered event, such as the remains of a fire-damaged building. Business interruption coverage reimburses the business for income lost and expenses incurred after covered damage occurs and until the damages are repaired. Other types of coverages are available and might vary from one insurance carrier to the next.

A commercial property floater is another option for businesses. The commercial property floater extends coverage to business equipment and property that moves to different locations. An example is equipment owned by a construction company that is used at different job sites without having a fixed location. The floater is connected with the primary commercial property insurance policy.

Commercial property insurance is sometimes combined with the business's liability insurance as one policy. The limits on the joint policy are sometimes lower than the limits on a separate policy, so a business with a lot of expensive equipment might need a separate commercial property insurance policy. A business with expensive equipment or a large property often spends a lot of money on commercial property insurance, but the premiums might qualify for a tax deduction because it is considered a business expense.

What is Commercial Property Management?

Commercial property management is a business service designed to assist owners in the supervision of commercial properties. Essentially, the property manager takes care of details related to the upkeep of the buildings on the property, qualifies potential tenants, oversees leasing of sections of the property, and collects rentals on behalf of the owner. The process of managing commercial properties may involve overseeing any type of property from retail space to multi-storied office buildings.

Many property owners choose to engage a commercial property management firm as a means of making sure all the day-to-day details of operating a commercial property are handled competently. The management firm is usually granted authority to make decisions that impact the amount of income the owner derives from the property. In many cases, the right management can result in a lower turnover of tenants as well as securing the best possible rental rates for the space.

The process of commercial property management involves screening potential tenants. The management firm accepts applications, conducts background checks, and prepares the leases that are offered to applicants who are approved. For the duration of the lease, property management firms will make sure that the tenant is provided with all the benefits and responsibilities outlined in the lease agreement.

A commercial property manager serves as the liaison between the owner and any tenants residing on the property. Typically, tenants approach the manager when repairs are needed or there is some complaint or concern about the property in general. The rental property manager will then take steps to resolve the matter, hopefully to the satisfaction of the tenants and the owner.

Another aspect of effective commercial property management involves the eviction of tenants who fail to comply with the terms and conditions of the lease agreement. Since most jurisdictions have specific regulations that must be followed in order to conduct an eviction, the property manager will ensure that each step in the process is followed to the letter. Doing so makes it possible for the property to be vacated and made ready for a new tenant as quickly as possible, thus restoring the revenue stream for the owner.

Many commercial property management firms promote their services by pointing out their ability to make sure potential tenants are screened properly, that the owner receives a steady income from the property, and that tenants are happy and more likely to remain in place for many years. Some firms structure their fees as a flat rate per month, while others base the monthly fee on a percentage of the revenue generated due to the firm’s efforts. When engaging the services of this type of a property management firm, it is important for property owners to understand the scope of the responsibilities that the management firm will take on, and that the benefits are worth the fees charged.

What Is a Commercial Property Manager?

Commercial property managers oversee a variety of properties and handle countless duties. In general, most commercial property managers handle properties that produce income, such as office spaces, shopping centers, industrial spaces, and warehouses. Each commercial property is unique and requires a different set of obligations for proper management.

Most commercial property managers have extensive experience in real estate and were realtors at some point in their career. Many managers have a baccalaureate degree in business administration, finance, or public administration. In some countries, a commercial property manager must have licensor or certification to legally work and manage real estate. A good property manager is able to increase the value of a real estate owner's investment, however, a poorly managed property can depreciate very quickly.

Most commercial real estate owners hire property managers to do the tedious and labor-intensive process of successfully controlling their real estate so that the owner can easily manage his or her investment. Some investors lack the expertise to successfully supervise their property and extend this duty to commercial property managers. Commercial property managers are normally hired directly by the real estate owner or they secure their position through a property management firm.

A commercial property manager understands the needs of the tenant and property owner and serves as a liaison between the two. The property owner wishes to keep their property well-maintained and the tenant often needs a variety of duties fulfilled that fall into the hands of the commercial property manager. Some commercial property managers oversee small spaces while others manage over a million square feet of space.

One of the most challenging aspects of a commercial property manager is handling the financial aspects of the real estate. Property managers have the task of collecting rent, paying insurance, handling the payroll of maintenance workers who help operate the property, and calculating taxes each year. These financial documents are normally placed in reports that are submitted to the owner of the property by the property manager.

Commercial property managers must also ensure that the property is safe and secure. The manager must facilitate repairs and inspect the structural integrity of the property, landscaping, and any facilities connected to the real estate. Handling requests and complaints are one of the more stressful parts of a property manager's job.