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Annapolis Real Estate and Business Litigation Law Blog

Advice on buying commercial property

While many Maryland entrepreneurs prefer renting a property for their business, there are many benefits, such as greater freedom and flexibility, to purchasing land or building a brand-new facility. However, potential business owners may wish to consider some financial and legal aspects prior to buying a commercial property.

Business owners who are thinking of purchasing land where they can construct their facility should consider an important factor: the location. Commercial properties that are located in prime areas not only get more exposure, they tend to sell better than those that are located in obscure areas, which is an added benefit to owners who want to sell the business one day.

Commercial real estate leasing with an IT twist

Business owners in Maryland and around the country often find it difficult to identify suitable properties to rent when they need more space or wish to open additional locations. In many cases, they have to contact multiple leasing agencies to get an idea of what is available or trawl through online databases with no guarantee that the information they are looking at is current. However, two Manhattan-based startup companies are hoping to revolutionize the commercial leasing sector, and one of them was recently acquired by a major real estate investment and services firm.

When SquareFoot was launched in 2011, the goal of the company was to develop an online commercial real estate leasing portal that would give both brokers and tenants a single virtual location to conduct all of their business. After securing a $2 million injection of capital, SquareFoot's founders were ready to venture out and claim their share of a $30 billion dollar market. The company's platform allows prospective tenants and brokers to schedule viewings and tours, exchange information and stay in contact with one another throughout the entire rental process.

Common commercial lease disputes

Many Maryland business owners choose to lease space for their companies as opposed to purchasing commercial real estate. In some cases, they will have disputes with their commercial landlords about the terms of their leases or some other issues. If you are currently involved in a dispute with your commercial landlord, it may be very frustrating and may be costing your business money.

There are some common types of disputes that arise between commercial landlords and business tenants. Many disputes arise over the meaning of certain terms of the leases or failures to pay rent. Others involve repairs that are needed and whose responsibility it is to complete them.

Chinese investing in U.S. commercial real estate

Chinese investors are expressing increased interest in the U.S. commercial real estate market following the election of Donald Trump, according to real estate experts. The incoming president's policies are expected to be pro-growth, which is sparking demand for dollar-dominated assets in Maryland and across the U.S.

Experts say the U.S. commercial real estate market is a standout on the global market, as it is not overbuilt and offers well-balanced loan-to-equity ratios. That translates into much lower risk for investors than in previous stages of the real estate market recovery. There are also concerns that the dollar will appreciate, which is prompting some investors to allocate their capital into the U.S. market. Other contributing factors are the slowing Chinese economy and a competitive commercial real estate yield profile. Expectations are that inflation and job growth in the U.S. will increase, making American commercial real estate a better long-term hedge.

Why investing in commercial real estate may be smart

Now may be a good time to invest in commercial real estate in Maryland and other parts of the country. Besides the fact that commercial properties are more valuable nowadays, there are other reasons why this type of investment could be a wise decision.

Investing in commercial real estate can produce substantial wealth and create long-term returns and seems to be continuing to be a valuable asset. According to market analyst Real Capital Analytics, the price for commercial properties has surpassed the 2008 peak and these properties are still going up in value. A large number of real estate investors are optimistic of the market, according to the Urban Land Institute. Also, for the first half of 2016, total commercial real estate sales in the U.S. amounted to more than $139 billion, according to reports. As a result, private equity real estate investors can experience remarkable returns.

Why millennials should invest in commercial real estate

Young adults living in Maryland may be more comfortable taking risks than middle-aged and elderly people. However, just because they don't mind a little risk in their lives doesn't mean that they want to buy stocks. Investing in the stock market is so volatile that many would rather keep about 70 percent of their assets in cash.

Millennials with cash savings may want to consider investing in commercial real estate instead of letting their money sit in the bank. Real estate can be a much more stable investment than stocks. Another benefit of real estate investing is that it can help an investor to earn a steady monthly income from rent payments.

REITs becoming less popular with rising interest rates

Some commercial real estate investors in Maryland are becoming more wary of real estate investment trusts. REITs are expected to do poorly in an environment of rising interest rates, and the reduction in the corporate tax rate that was proposed by Trump may also have a negative impact on REITs. However, some analysts say that investors should not write off these vehicles.

For the past few years, REITs have been very attractive investments. Because REITs must use 90 percent of their taxable earnings to pay shareholder dividends, shareholders get high returns when interest rates stay low. The CEO of a REIT said that every time there is talk of rising interest rates, REITs are hit hard. When the Federal Reserve raised interest rates on Dec. 14, many investors began to sell their REIT shares.

Finding zoning relief

Zoning is the main tool used by municipal authorities in urban planning. Maryland property owners may want to know what their options are if they need zoning relief.

Property owners have two options if their land is affected by zoning. They can request an exception from the government. The landowner also has the option of challenging the zoning ordinance as unconstitutional or improper. Before they try to challenge a zoning decision, they should consult with an attorney who has experience handling land use cases.

Investing in commercial real estate under Trump

Following the November presidential election, many Maryland investors, business owners and others might be wondering how the country will fare, both economically and politically. There are some factors that could have some positive effects on both.

Since Donald Trump was elected president, the Dow Jones Industrial Average has risen, which is somewhat surprising in lieu of the fact that the futures market was down 800 points late on election night. There has also been an increase in interest rates.

How to account for commercial rental costs

Trying to determine the total cost of a commercial property rental in Maryland or elsewhere may be more complex than it seems at first glance. This is because a renter may be paying more than just the base rent for the space. Furthermore, not all square footage is considered equal inside of a commercial unit as one landlord may measure from an outer wall while another measures from the inside of a wall.

This may result in a renter paying for useless space behind a wall or that is otherwise unusable. As a general rule, an open space is more desirable than one that may have a lot of tight angles or other obstructions.