An article published on The Business Journals’ L.A. Biz website just this week highlighted how demand for industrial real estate has recently reached all-time highest levels here in Los Angeles. That same report chronicles how vacancy rates have hit the lowest rates they’ve ever been.
The trend in L.A.’s real estate market may have you wondering whether you should sell your property off to a buyer that’s made the highest offer on your commercial property or capitalize on the low vacancies and high demand, and lease it out. There are a few different factors that you’ll want to weigh as you decide which option is ideal.
Do you hold or sell your commercial real estate?
In a situation like the one described on L.A. Biz, you’re aware that the high demand and low vacancy rates mean that you can command higher-than-average monthly rent. You can likely negotiate more terms in your favor as well.
Continuing to lease your property may be ideal if you believe that your property will retain a similar value to what it is now, or it still has room to increase. If you have any inkling that the value may drop, then you may opt to let it go now when you can command a top-level offer.
One factor that may render such a decision less than straightforward is if your commercial or industrial space is in a new development or emerging market. You might be able to command a much higher sales price at a later phase in the development or as it becomes more popular.
On the flip side, if taking the risk of the property value declining as you watch your rent trickle in from the lease makes you uncomfortable, then there may be no time like now to sell off your space. You may end up with just as much if not more (in a far shorter time) by putting it up for sale, especially if an unexpected costly repair were to be needed if you were a landlord.
Entering into a short-term lease while you closely monitor the market is also an option.
No matter what choice you make, it’s imperative that you closely analyze any contract you sign. It’s important to familiarize yourself with procedural or tax obligations that accompany your transaction as well.