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Los Angeles Real Estate Law Blog

Properties featuring commercial leases impacted by many factors

The real estate industry in Los Angeles and other parts of the United States continues to change as a result of a variety of factors. These factors include both short-term and longer-term issues. Here is a look at a couple of these issues and how they may impact those purchasing properties featuring commercial leases going forward.

A shorter-term issue that is affecting commercial real estate is rising interest rates. As interest rates rise, fewer investors have shown an interest in purchasing real estate properties. However, this cloud does have a silver lining, in that investors who have been struggling to get into the market due to stiff competition may now be able to enter it more easily.

Toxic mold and the obligation to disclose risk to occupants

The presence of mold in the workplace can lead to the sickness and harm of the men and women who work on the premises. Under California law, landlords have the obligation to disclose the presence of mold in commercial buildings they own and lease to businesses. Failure to do so or efforts to hide the mold is illegal and could be grounds for a legal claim. 

Toxic mold can make people sick, causing potentially serious illnesses. The presence of mold can require extensive mitigation, treatment and work, and many landlords try to avoid these costs by hiding the problem. When a business leases or purchases a commercial space that had underlying mold issues that were not disclosed, it could be grounds to take legal action to address the problem.

Various types of commercial leases may exist in Los Angeles

Finding the ideal space for housing a business in Los Angeles can no doubt be thrilling. However, an important step in this process is to agree to and sign a lease. Here is a look at the various types of commercial leases that business owners can take advantage of, with each one having both benefits and challenges.

One type of commercial lease is a net lease. This type of lease offers the benefit of coming with a lower rent price. However, tenants who choose these types of leases are also responsible for additional rent fees that cover property maintenance and operation expenses like common area maintenance items, real estate taxes and property insurance. The common area maintenance item fees specifically cover fire sprinkler, parking lot, landscaping, trash, water, sewer, property management and janitorial service costs, among others.

Only certain properties featuring commercial leases are in demand

Los Angeles and other parts of California remain hot areas for the purchase and sale of business properties. However, not all types of commercial real estate are continuing to gain ground in the Golden State. Multifamily and industrial properties featuring commercial leases are especially in demand right now, whereas office and retail properties are losing steam.

According to a recent survey, the office markets in California have all but topped out. The development of office buildings already purchased is expected to continue. However, the level of new development witnessed in a variety of markets during the past few years likely will not occur during the next few years, in part due to increasing cap rates.

Profitable commercial leases may follow vacant land purchase

Investors in Los Angeles who are in search of a creative way to maximize their returns today may want to consider the real estate. Specifically, they may want to look at purchasing vacant land. After all, this land can be developed to include buildings featuring potentially lucrative commercial leases.

For those interested in buying land, they may want to try to generate money from their land while they are waiting for the land to be developed. For instance, they may wish to use the land for agricultural purposes or even lease it. They could even make money from parking and billboards placed on the land.

Properties featuring commercial leases drawing foreign investors

Research shows that nearly a fifth of real estate agents selling non-residential properties closed sales with international clients in 2017. In addition, 35 percent reported that they had seen more international clients come their way during the past few years. As a result, now may be an ideal time for commercial real estate owners in Los Angeles to sell properties featuring commercial leases.

According to a recently conducted study, most real estate agents specializing in the buying and selling of commercial properties live in smaller markets. In these markets, their deals are usually under $2.5 million. However, these smaller markets' profiles are continuing to rise, as many foreign investors show increased interest in smaller properties found in tertiary and secondary markets.

Does your development need an OCIP?

When it comes to insurance needs and risk management for development projects, you want to make sure that you have all of your bases covered. Dangers and hazards are everywhere at construction sites, and it's nearly impossible to ensure everyone's safety 100 percent of the time.

Not only could the contractors and subcontractors working at the site suffer injuries, but someone not involved may also end up injured depending on the circumstances. In addition, the potential for inadvertent damage to your property or a neighboring property also exists. How are you going to cover everyone?

Selling properties with commercial leases can be tricky

For those interested in selling business properties in Los Angeles, issues can easily crop up that are beyond the seller's control. However, in some cases, some of the issues that arise can be blamed on the seller's mistakes. Here are a couple of mistakes that sellers of properties featuring commercial leases may make in California.

One common mistake that sellers make involves not approaching month-to-month leases properly. If a buyer is using a lender, the lender will want to see that the seller has a contractual flow of income that is greater than the mortgage payment. For sellers who may have some month-to-month tenants paying rent amounts that are below market, the sellers would be wise to lock these tenants into longer-term leases. If the property buyers will likely maintain these tenants, then the sellers may wish to get the tenants signed to one-year leases at the very least.

Retail commercial leases still offer promise for investors

The real estate world continues to evolve, so much so that it can be difficult to keep up. Of course, failure to keep up may mean many lost investing opportunities. Here is a look at a particular real estate myth that some investors in Los Angeles believe -- a myth that impacts those interested in investing in properties featuring commercial leases.

E-commerce has most definitely changed how consumers shop. However, this does not mean that physical retailers will be extinct in the near future. After all, retail sales in stores made up more than 90 percent of the $5 million-plus generated in the United States retail market in 2017. In addition, retail sales are slated to climb more than 4 percent this year.

Properties with commercial leases to be impacted by blockchain

The real estate market in Los Angeles and elsewhere continues to change thanks to the advancements being made in technology. A particular change that appears to becoming to real estate is the increasing use of cryptocurrency. This form of currency may come in handy not only for residential real estate but also for purchasing properties featuring commercial leases.

Real estate appears to be the ideal sector for embracing blockchain-driven innovation. In the past, completing real estate transactions via digital channels was never the norm. After all, these types of transactions have traditionally be conducted face-to-face with a wide range of entities.

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