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Negotiating commercial property based on the condition of the fit-outs

By Greg Bell

The fit-out of a commercial property, in many ways, is like a microcosm of the building itself: Depending on its modernity, attractiveness, and general appearance, it may either increase or decrease the value.

But no matter what, whether furnished or empty, modern or antiquated, the fit-out of a commercial property is sure to have a significant effect on the specifics of its sale – listed below are just a few of the ways how.

Who pays, who alters, and when

No matter the building, the fit-out is a question that has to be addressed when purchasing commercial real estate. If the building requires a fit-out, it’ll have to be decided whether that will be paid by the current or future owner. And additionally, if it is to be installed by the future owner, then it will have to be decided whether or not they will be able to commence the construction of the fit-out prior to the start of their lease, or afterwards.

As likely goes without saying, all these decisions are sure to have an effect on the final price of the building, depending on who is left shouldering the specific costs.

The “make-good” question

In commercial real estate leases, there is often a “make-good” clause governing whether or not the tenant is responsible for restoring the premises back to its original condition, either within a set period of time or just at the end of their stay.

When negotiating the purchase of a commercial real estate property that’s already hosting tenants, the question of whether or not there are make-good clauses in the lease agreements would be a major one – and the answer would certainly have an effect on the overall value of the building.

Additionally, even for new commercial properties without tenants, the “make-good” question is one that a building owner will have to confront: Not only whether or not to include them in commercial leases, but also to what extent.

Sparseness has upsides, too

As with all major real estate purchases, the circumstances are everything. Some prospective owners specifically look for a nearly “blank” building or establishment, so that they can have a more rigorous control over the final design. Others may prefer a nearly “prefabricated” building, with a completed fit-out, to better serve tenants and businesses ready to move in as soon as possible.

If you’re interested in buying commercial property on the Gold Coast – with a totally finished fit-out, a relatively sparse one, or anything in between – contact the expert team at Ray White Surfers Paradise for an extensive look at the market’s current offerings.

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