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REAL ESTATE Commercial Question

JScott

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A friend of mine approached me recently looking for an investment into a commercial real estate deal he's considering; since I don't know much about commercial, I wanted to start my research with you guys...

Basically, his idea is to buy a commercial office space, and configure it with a bunch of large individual offices and a bunch of shared spaces (conference rooms, kitchen, copy room, restrooms, etc).

He would then lease out the individual offices to small business professionals (accountants, lawyers, consultants, etc). Each "tenant" would have an office, as well as to the shared spaces. In addition, he'd hire a shared receptionist, who would greet clients, answer phones during normal business hours, and do other basic things for the individual consultants.

While this doesn't seem like a particularly novel idea, I can't recall ever seeing this done before (perhaps I've just never realized it). I'm just wondering if anyone has any experience with this type of commercial leasing, or have any suggestions about how I should be thinking about this type of investment.

Thanks!
 

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SteveO

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I have seen this before. The question would be whether he would make enough extra money on rents and services to make the hassle be worth the effort. It turns into people management which is not desired by me.
 
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JScott

JScott

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Steve -

The financial aspect of it seems pretty straightforward (not much different than owning multi-unit dwellings), but you're right that the equivalent of property management duties falls on the owner and can't easily be farmed out.

Though I guess with the right financials, there's no reason the owner couldn't hire an "office manager" who essentially did the property management role (finding tenants, handling issues, collecting rents, etc).
 

Allthingznew

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Assuming the property management aspect is in place, you could also rent use of the common space to those who don't lease an office.

Recently I've had to look for options to do interviews and orientation. I'm not looking for regular use space, just occasional use. Something like this might be a good option for me.

Also, with the popularity of Mailbox stores, you might also be able to allocate some use to using your address and, possibly, use of support staff, if you went that far. They rent your services, since they're already in place.
 
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JScott

JScott

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Assuming the property management aspect is in place, you could also rent use of the common space to those who don't lease an office.

Recently I've had to look for options to do interviews and orientation. I'm not looking for regular use space, just occasional use. Something like this might be a good option for me.

Also, with the popularity of Mailbox stores, you might also be able to allocate some use to using your address and, possibly, use of support staff, if you went that far. They rent your services, since they're already in place.
Great ideas...thanks!
 

andviv

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my lawyer works in that kind of setting. The secretary/receptionist and the conference rooms are shared by the tenants and this is a very nice office in a very nice building. He is happy with the arrangement and we the customers see a very nice looking, 'professional' office.
 

Yankees338

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There are a few other things that could be done with the spare space.

I was thinking of leasing out part of it to vending companies, too. While that'd probably only be good for maybe $30/month or so, it's certainly better than nothing! If there's a place like that on every floor, it could definitely add up.

I'm sure there are some ad agencies that would be more than happy to use some of that space for advertising, particularly if there is a good amount of traffic (such as a lot of flow of new clients coming in and out to see them). They could either hang little LCD panels on the walls, or they could go with old school poster type ads.

I also like Allthingznew's idea about leasing out the empty space on a short term basis. Perhaps he could also consider making a little business out of this. If there is some extra space in the property, maybe it would be worth more to him if it could be leased out daily to outside businesses as a meeting place. I'm sure there could be some plans that could be worked up with local businesses that would allow them all to get it for a few days a month.

Just some ideas; I hope they helped! Good luck [to your friend] and you of course, as always.
 

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