In the Manhattan commercial real estate market, selling your property can turn a substantial profit– especially if you employ the right tools and strategies.
From navigating fluctuating interest rates to keeping up with evolving buyer and tenant preferences, property sellers are facing many challenges. With the right strategies and insights, however, there are also significant opportunities you can seize.
If you’re planning to sell commercial real estate in the next few months, here are some tips that can help you maximize your property’s value, connect with potential buyers, and position your asset for success in the ever-changing landscape of Manhattan real estate.
Table of Contents
- Tip #1: Set A Competitive Price
- Tip #2: Prepare And Showcase Your Property
- Tip #3: Explore Virtual Showcasing
- Tip #4: Sell Commercial Real Estate With An Expert CRE Agent
- Tip #5: Prepare The Necessary Paperwork
- Tip #6: Be Flexible In Your Negotiations And Concessions
- Get High Returns On Your Investment With The Goldman Group
TIP #1: SET A COMPETITIVE PRICE
Sell commercial real estate quickly and for top dollar by pricing it according to two factors: your property’s unique selling points and the current market value of similar properties. While this may sound simple, it can be challenging in a dynamic, corporate location like Manhattan. You can start by:
- Getting an appraisal
Like with any real estate transaction, an appraisal will provide you with an accurate market value estimate of your property. This figure will aid in smoother negotiations with potential buyers.
Make sure to work with a qualified commercial appraiser that specializes in Manhattan properties– they have intimate knowledge of the specific factors that influence property values in the borough. This allows them to provide a more accurate assessment of your property’s worth, taking into account local trends, zoning regulations, and neighborhood dynamics.
- Avoiding overpricing
Set a price that piques interest without deterring buyers. The rule of thumb is to aim for an asking price that is approximately 10% higher than your expected sale price range. Doing so leaves room for negotiations. Three factors– property type, location, and current market demand– however, will still play an influential role in determining a good asking price. Having an expert CRE agent on your side can help you figure out the best pricing strategy for your specific property.
- Staying informed
In the ever-changing Manhattan real estate market, flexibility is key. Do your research and seek guidance from experts who possess a deep understanding of local dynamics. This will help you arrive at a competitive price point aligned with your goals and constraints.
WHAT IS HAPPENING IN THE MANHATTAN COMMERCIAL REAL ESTATE MARKET?Buyer-friendly market conditions According to Property Shark, the cost of office space in Manhattan dropped by 6% in Q2 2023 compared to the same quarter last year, now averaging $672 per square foot. There were also fewer property sales, with a 49.5% decrease in sales volume year-over-year and 28.1% less CRE transactions. While this can provide more affordable entry points and negotiating power for buyers, the total square footage available also went down by 46.6%, making options limited. The market currently leans towards buyers, but there still are several opportunities available for the strategic seller. Fewer property sales and transactions mean less market saturation, providing you with more space to negotiate advantageous terms. The decreased availability of office spaces can amplify demand as well. This could potentially lead to bidding or higher sale prices if you can price and market your property right. High interest and vacancy rates in Q3 and Q4 The recent decision by the Federal Reserve to keep interest rates unchanged after months of substantial rate hikes offers a glimmer of hope for both buyers and sellers, according to the latest CRE market insights report (September 2023) from the National Association of Realtors (NAR). Over the past 18 months, the relentless interest rate hikes had created a challenging lending environment; lenders became even more cautious after the collapse of two regional banks back in March 2023. This caution translated into tighter lending standards, which mostly affected CRE loans held by small and mid-sized banks across the country. Delinquency rates for CRE loans have also increased, but they still remain at historically low levels. Although the US market continues to face challenges like higher vacancy rates and slower rent growth, the pause in interest rate hikes will provide some breathing room for sellers by offering buyers a window to lower borrowing costs. This could lead to more demand and improved investor confidence. |
TIP #2: PREPARE AND SHOWCASE YOUR PROPERTY
Ensure that your property is in prime condition before putting it up for sale. The first thing buyers will watch out for are any structural issues or deferred maintenance. Adding certain amenities or improving exterior landscaping can boost your property’s desirability and value as well.
Preparing to sell commercial real estate also involves staging, which is key to attracting a wider range of potential buyers. Here’s how you can maximize your property’s appeal:
- Identify your ideal buyer
Align your staging efforts with the preferences and needs of potential clients or tenants. Consider whether your property is best suited for startups, high-end retail, or other specific businesses. Then, create a dedicated website, brochure, or promotional material that provides details such as location, size, layout, amenities, utilities, parking, zoning, and pricing. High-quality photos and videos from various angles can also make your property stand out and leave a lasting impression.
- Make a good first impression
First impressions count. Regularly maintaining your property before and during the selling process, including lawn care and paint touch-ups, will significantly enhance its visual appeal.
This welcoming exterior also extends to parking and accessibility. Ensure that your property provides sufficient parking options and convenient access that can attract potential buyers and their tenants. A clean facade – which can be done with a coat of fresh paint and basic landscaping – can easily create an inviting and accessible environment.
- Highlight space and versatility
Decluttering and organizing spaces will make them appear larger and more welcoming. They can also serve as a valuable sales tool, providing a blank canvas where buyers can envision its full potential for their own business or endeavor.
Ideally, you should try to stage your property in a way that shows how it can accommodate a variety of tenants and uses. From open-concept workspaces to private meeting rooms, demonstrate the flow and functionality of your commercial spaces through good lighting, cohesive and welcoming decor, and strategic furniture arrangement.
TIP #3: EXPLORE VIRTUAL SHOWCASING
The convergence of technological innovation, changing work dynamics, and the aftermath of the pandemic has compelled the commercial real estate industry to elevate its digital game, and you can take full advantage of these developments by going virtual.
Why go virtual?
Virtual showcasing of commercial spaces allows sellers to break down the barriers of time and location, enabling prospective clients to explore properties at their convenience. Moreover, the spectrum of virtual tours is vast, ranging from professional photos to immersive AR/VR 3D videos. This offers buyers numerous ways to understand, interact with, and see the potential of various spaces and buildings.
A green and cost-effective solution
This digital approach aligns with environmental, social, and governance (ESG) policies by reducing carbon emissions associated with travel. They also integrate seamlessly into digital campaigns, which can reach prospects faster and in a more affordable manner than traditional print advertising. More importantly, they can offer you valuable insights into visitor behavior – analytics can reveal who’s interested, what appeals to them, and where bottlenecks occur, ultimately helping you optimize your marketing strategy.
The challenges of virtual tours
Implementing virtual tours presents its own set of challenges. Aside from selecting the right type of tour to maximize value, some tours require technologically-advanced processes like on-site mapping and 3D laser scanning. Off-plan buildings may even need intricate CGI tours, the production of which can be costly and time-consuming. Fortunately, property technology is evolving rapidly, and some virtual tour programs like Matterport and CloudPano are user-friendly and accessible.
Live tours are still important
Although virtual tours are on the rise, live tours still remain pivotal in the sales process. They provide elements that technology cannot replicate, such as emotional connection, non-verbal communication, and sensory experiences. So, striking a balance between virtual and live tours is essential, where you can utilize the power of technology while still preserving the human touch.
THREE POINTS TO HIGHLIGHT IN YOUR PROPERTY’S MARKETING STRATEGYWhen you sell commercial real estate, it’s crucial to convey the property’s potential for future growth and development. Here’s what your marketing strategy should communicate to buyers: Prime location Capitalize on your property’s location, especially if it’s situated in a rapidly growing area. Note its proximity to major transportation hubs, employment centers, and desirable amenities. Make sure to highlight your property’s capability to accommodate various purposes and expansion, particularly if it is located in an area with versatile zoning. Excellent condition and infrastructure A property that exudes durability and quality is inherently more valuable in the eyes of potential buyers than one with fancy amenities. Highlight any upgrades or renovations that you have made to the property, as well as any energy-efficient features that can help to reduce operating costs. Buyers want to invest in a property that will last. Upcoming or potential development Mention any upcoming development plans and projects slated for the near future, since it highlights your property’s potential for appreciation and provides potential buyers a compelling reason to invest If your property is currently underutilized, vividly showcase its potential for redevelopment. Present creative ideas for transforming it into a different use, such as a mixed-use development or a high-rise residential building. |
TIP #4: SELL COMMERCIAL REAL ESTATE WITH AN EXPERT CRE AGENT
Partnering with a seasoned commercial real estate agent is the catalyst for success. Here are the key reasons why you should collaborate with them:
Local market proficiency
Experienced agents offer an intimate understanding of the local market, including neighborhood trends, zoning laws, and business landscapes. Their insights can be crucial not only to your pricing strategy, but also to identifying and targeting the right buyers. This is especially important for sellers in a real estate market like Manhattan, where having access to a wide network of buyers can give you a distinct advantage.
Specialized skill sets and strategies
Commercial real estate agents are skilled negotiators, capable of securing favorable deals for sellers. Whether it’s office space, industrial facilities, or retail properties, their experience and knowledge ensures that everyone walks away from the table satisfied. Moreover, these professionals can streamline the selling process for you, helping you navigate complex paperwork and ensuring a smooth transaction that maximizes returns.
Long-term partnerships
Partnering with a commercial real estate agent can lead to success in your future endeavors. The best real estate agents maintain a lifelong relationship with their clients, offering access to specialized knowledge and assisting them in opening doors to other opportunities.
TIP #5: PREPARE THE NECESSARY PAPERWORK
Preparing your files and documents ahead of time can help you expedite the selling process and avoid any delays or issues. Here’s a structured approach to guide you through this crucial step:
- Order your title report promptly
As soon as you decide to sell your commercial property, you need to order your title report through a trusted real estate attorney, since it can take up to 10 days or more to be generated.
A title report is a document that outlines the legal status of a property and information about its ownership. Processing them early is important because they can help to identify any potential problems with the title to a property.
For example, if the title report shows that there is a lien on the property, you can take steps to resolve the lien before closing on the sale. Moreover, title reports are typically required by mortgage lenders before they can issue a loan. So, having them on hand can instill more confidence in your potential buyer.
- Gather your essentials
Before listing your commercial property for sale, ensure that all necessary paperwork is in order. Failing to do so can deter potential buyers who may be concerned about unforeseen issues. Make sure you have your ownership documents, permits, and any required certifications that the buyer will need.
If your property has existing tenants, put together a comprehensive rent roll and gather profit and loss statements from the past two years. This allows potential buyers to assess tenant lease durations, which can help their decision-making process and enable them to identify potential revenue growth opportunities in purchasing your property.
Other important documents that you need to prepare include:
- A property survey, a map of the property that shows its boundaries, dimensions, and other relevant features. It is typically done by a licensed surveyor.
- Copies of lease agreements, if your property is currently leased.
- A certificate of occupancy from the city government of New York, which ensures that the structure or building is for human occupancy, as well as complies with all applicable building codes and zoning laws.
- Meticulously review your financial records
Financial records play a critical role in the due diligence process. Lenders scrutinize these records, checking for any discrepancies or irregularities, so it’s crucial that your net operating income is aligned with what you’ll be presenting to buyers.
Avoid the temptation to manipulate expenses to reduce taxable income, as this may misrepresent the property’s cash flow. Properly categorize expenses as well, including the depreciation of tenant improvements and capital expenditures. This assures buyers of your transparency and can help facilitate smoother negotiations.
TIP #6: BE FLEXIBLE IN YOUR NEGOTIATIONS AND CONCESSIONS
Negotiating the sale of your commercial property demands a strategic approach and a willingness to adapt. Before you approach the negotiating table, keep these in mind:
- You have the option to walk away
Even if the Manhattan market isn’t leaning towards sellers, you should be prepared to walk away from the deal if you are not getting what you want. This doesn’t mean that you have to be unreasonable, but it does mean that you should be willing to give up on the deal if it is not in your best interests. It’s important that you know what your non-negotiables are.
- Be open to compromise
Both parties will need to give a little bit in order to reach an agreement. Concessions are a part of any negotiation, and depending on your priorities, they can range from big compromises like a lower sales price or longer lease terms to lighter considerations like a flexible closing date or inclusions of certain items like fixtures, furniture, and equipment.
- Focus on the long term
Think about the long-term implications of the deal and why you were selling your property in the first place. Do you plan on reinvesting in other properties or changing your investment strategy? Do you want to take advantage of current market conditions? Or do you simply want to liquidate your asset? Staying true to your intentions can help you clarify which concessions to make during negotiations.
GET HIGH RETURNS ON YOUR INVESTMENT WITH THE GOLDMAN GROUP
Ready to sell commercial real estate in this dynamic market? Rachel Goldman and her team at The Goldman Group offers unparalleled hyperlocal expertise and bespoke services tailored to your specific investment goals in the Manhattan commercial real estate market. With a pristine track record in building trust and fostering long-lasting client relationships, we are committed to helping investors and businesses achieve both short- and long-term success.
Get in touch with us today! Schedule a consultation with Rachel by calling 813.810.2829 or by sending an email. You can also send us any questions or concerns here.