Companies specializing in commercial real estate broadly speaking buy into properties vacant or with tenants. The business establishment utilizes these properties to let it out to affable tenants through lengthy term rent agreements. In some instances the companies will source and purchase commercial property for certain tenant requirements if and when required.
Characteristic commercial properties may contain shops, offices, medical facilities, diesel depots, assembly plants, retail, warehouses, factories, hotels, motels, quarries, etc. The aforementioned properties serve as a guideline only.
Most companies will only look at existing buildings with or without tenants. Developing such a property can take a colossal amount of time and work where an current building can attain earnings within a couple of months.
Acquisitions are usually focused within the borders of a specific region. This generally speaking due to these acquisitions being close to the base of the business where it is easier for staff to access the property and to do real estate management duties.
Notwithstanding the above numerous companies will seriously seek for other opportunities subject to the management of the assets being outsourced to professional property managers or satisfactory operators at work on the property e.g. a recognized hotel group managing a hotel property.
Companies will typically seek for a tenanted property with lease durations in excess of three (3) years with stable tenants. Companies in South Africa will by and large look a yield, or potential yield, of roughly 9% – 13%. There are in any case modifying circumstances on every property and yield is only compelling of the present-time status of a property and not the expected status or future possibility of a property. The potential of the property should be taken into consideration. Companies will seek for properties with higher purchase prices subject to a high national tenant mix and subject to long term contracts.
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