Best Practices to Inspect a Potential Commercial Real Estate Property

Best Practices to Inspect a Potential Commercial Real Estate Property
John Heimbigner

John Heimbigner

Whether you’re leasing or buying commercial real estate space, it’s a costly – and complicated – endeavor. And as with any long-term arrangement, it’s important to do your homework and protect your company’s best interests. That’s why a careful, thorough property inspection is an essential part of the transaction. By ruling out any potential problems and giving your company a better idea of the space’s limitations or requirements for repairs, a property inspection will weed out unsuitable options and help inform your lease negotiation process. 

While you can certainly inspect the property on your own, it’s always helpful to have a professional property inspector to give you an unbiased look at a potential space. Either way, there are plenty of strategies to inform yourself before you make a commitment.

What to Keep in Mind Prior to the Inspection

During the initial walkthrough, take note of the exterior grounds of the property. Parking lot conditions, markings, landscaping, concrete quality, layout, accessibility, lighting, and general condition of the space. While you won’t know the integrity of the foundation or structural elements, look for signs of damage, wear, cracks, etc.

During the walkthrough, have a member of your team accompany you to take notes whether you conduct your own inspection or hire a professional inspector. It helps to have your own information to compare your findings with that of the owner and the inspector to ensure nothing gets overlooked during the negotiation process. 

What to Look for During the Inspection Process

A thorough commercial real estate inspection should check every aspect of the property, including:

  • -Structural elements, from the condition of the roof, flooring, walls, and foundation
  • -Utilities like HVAC, fiber connection, electrical, and plumbing systems
  • -Local and state codes and regulations have strict guidelines, so ensure you’re up to speed on your area’s specific requirements so you can make your own assessment – and ask the right questions
  • -Condition of external and public-facing capacity, like parking, sprinkler -systems, sewage, public access, and garbage removal
  • -Fixtures, paint, ceiling condition, and window integrity
  • -Accessibility features for wheelchair access, common areas, restrooms, lobby condition, emergency exits, and elevators and escalators 

Look for signs of wear and tear in each room and aspect of the space. Signs of water damage, mold, structure problems, building access, aging concrete, and even the condition of utility connections outside and around the building can be major headaches during the length of the lease. 

How to Conduct Your Own Inspection

Much like the previous section, you’ll want to take a careful look at the property during your walkthrough, but if you choose to conduct your own commercial property inspection, there are a few more things you should know.

First, you’ll want access to the property and time to be thorough. It’s unlikely that the property owner will allow you to dig deep without their own representative onsite, but having the opportunity to spend adequate time at the property without the pressures of someone over your shoulder will be invaluable. If you’re seriously considering a property, request an allotted time to walk through and have complete access to the property during the inspection. It’s important to take your time and be uninhibited from sales and marketing speech in order to get a clear, complete picture of the condition of the property. 

Second, taking meticulous notes and photos of anything that’s no up to par. That could mean missing paint, damage to the parking areas, signs of wiring issues or fixture damage, mold beneath sinks or in utility areas, or scuffs on flooring or walls. Not only will these allow you to demonstrate areas for improvement should you take custody of the property, it’ll give you leverage during the lease negotiation process. 

Finally, even if you don’t bring in a professional property inspector, it’s worthwhile to provide your findings (and documentation of damage) to a third party. That could be a trusted consultant, your commercial property broker, or a property attorney. If there’s something that looks off, but it outside your area of expertise (such as analyzing electrical or HVAC systems for integrity and condition), you should bring in an experienced commercial property inspector for a second opinion. 

How to Process Your Inspection Information – and What Comes Next

Once the inspection is complete, you’ll have all the information you need to start the lease negotiation process with the property owner or real estate manager – especially if you’re purchasing a property. By inspecting the details and potential shortcomings of a property, a lower sale price may make up for outdated utility systems and necessary repairs. 

In lease negotiations, your results can be viable leverage to improve your lease terms or convince ownership to make the needed repairs before you put ink on paper. Because issues with a property can negatively impact your finances and operations, it’s important to obtain a clear and comprehensive inspection before negotiations begin. 

No matter the direction you take, a building inspection gives you a clear picture of the quality and condition of the building so you can make a more informed decision about the rental or purchase before committing to a long-term solution. 

John is the VP of Sales at OfficeSpace.com where he leads broker relations and sales. Prior to being VP of Sales, he was the Regional  Director for the company. John has over 25 years of experience working in the commercial real estate industry. Before OfficeSpace.com, John was a commercial real estate broker for the Norman Company in Seattle, WA.

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