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What is Due Diligence When Buying Commercial Real Estate? - Caldwell Commercial Real Estate

When you’re in the market for commercial real estate, either as an investment or for your business, you’ll want to include a due diligence period as a critical part of your contract. This is a period of time given to the purchaser to fully examine the property and investigate various aspects of it. What you do during this due diligence period is essential when buying commercial real estate. 

Buying Commercial Real Estate — Why Due Diligence is Important

The last thing you want is to invest in a commercial property only to find out later that it doesn’t meet your needs. Or worse, there is something seriously wrong with the property that impacts its value. 

Many people begin the due diligence process before signing the purchase contract. Alternatively, you can lay out specifically in the contract the things that must happen for the deal to close. If you are financing your purchase, the lender will have its own due diligence requirements. But having your own is also prudent. 

Things to Include in Your Commercial Real Estate Due Diligence Process

The due diligence period typically begins after the buyer signs a letter of intent (LOI). Depending on the purpose of the purchase and the type of property, the items included in the due diligence process can vary. In general, however, these are some of the most common things you’ll want to include in your commercial property due diligence. 

Physical Inspection

Just as you would a home, you’ll want to order an inspection of the property by a trained professional. This person will physically review every aspect of the property to make sure there aren’t any obvious issues not already disclosed. 

Economic Assessment

Your economic assessment will involve investigating the seller’s documentation of the property’s income generation, such as leases, and reviewing comparable properties in the area. This is also the time you’ll want to line up financing if you haven’t already done so. 

Environmental Assessment

Environmental testing is a key element of due diligence when buying commercial real estate. A Phase I Environmental Site Assessment (ESA) will provide the basic information you need to determine if further testing of the site is indicated. A Phase II assessment would take more time and involve things like testing groundwater and getting drill test soil samples. 

Geotechnical Assessment

This type of assessment can be done by an expert who will tell you whether there are any seismic, water table, or soil-bearing concerns with the site. If you are planning to build additional structures, you will want a full geotechnical study. 

Title Search & Survey

Performing a title search is invaluable during the due diligence process. This also includes getting a copy of the site survey and reviewing the deed to identify any possible easements, boundary concerns, or zoning restrictions. 

Caldwell Commercial Can Help You Buy the Right Commercial Property

If you’re interested in buying commercial real estate in the Charleston, SC, area, due diligence is a must. Fortunately, you don’t have to navigate this process on your own. Caldwell Commercial Real Estate has an experienced team of commercial realtors who can guide you to the right piece of property and assist with the due diligence process. 

Our team has over 80 years of combined industry experience. When you partner with us, you can rest assured that we will work diligently to surpass your expectations and achieve your goals. Contact us today.