Commercial
real estate in Windham is in many ways very similar to residential real estate
as it is a tangible asset you can see and touch. It is, however, very different
in terms of how it can be valued by Broker® or appraiser, owned, financed and
ultimately used by a commercial business entity.
Location
is key since many commercial real estate tenants and owner users are looking
for specific sites for high visibility, signage, traffic count, ample parking
for customers and employees, as well as, sewer capacity for restaurants,
daycares, salons, breweries, commercial kitchens, etc.
Other
than a very small area in the South Windham Village that has public sewer, the
rest of Windham is private septic systems. This is currently a limiting factor
for attracting some types of businesses to the town due to the “high cost” of
large private septic systems.
Zoning
is a key factor in the decision-making process. Windham has a variety of zones
that allow some level of commercial activity. The C1 commercial zone is one of
the most popular zones as it allows the widest variety of commercial uses
including construction services. It is also one of the more expensive zones for
commercial real estate.
Other
zones that allow some level of commercial uses are; C2 commercial, C3 commercial,
ED (Enterprise Development) zone and I (Industrial) zone. There are currently
on-going discussions with the Town Council, Economic Development, local business
owners and citizens about adding uses such as construction services in other
zones in Windham such as the C3 zone. The ED zone and the I zone may also be
considered as the Town seeks to attract larger employers that could add a
stronger commercial tax base and good paying jobs. It is a good idea to pay
attention to Town Council, Planning Board and Zoning Board of Appeals actions
as those actions can have an impact on value.
Regarding
the valuation process, the comparison of similar properties sold can help gauge
value on a per square foot basis. Most
of the time, commercial real estate is valued on an income approach; income
less vacancy allowance, less other expenses, gives you a net operating income
(NOI).
Dividing the NOI by a cap rate such
as 10% capitalization rate (debt and equity), will give you an estimated value.
And of course, the underlying condition of the building(s), location such as
Rt. 302 exposure and possibly a corner lot at a signalized intersection,
quality and length of leases all are factors when you are considering the
purchase of a commercial real estate property.
Just
like buying a home, you need to make sure the property is in compliance with town
ordinances, state law and in some cases federal law. As part of your due
diligence investigating the property, you should meet with town staff in code enforcement,
planning and assessing to “trust but verify” any information you have received from
the seller or seller’s representatives.
And, I always recommend that a new business or developer coming to town
take the time to meet with the Town of Windham’s Economic Development Director
to look for tools that may help make a deal happen in Windham.
Buying
commercial real estate as well as leasing commercial real estate requires some
added work with professionals. You should consider engaging a seasoned commercial
real estate professional for a property search and due diligence. In many cases, you will also want to engage a
legal professional, accountant - tax specialist, land surveyor, civil engineer
and possibly other specialty engineers depending on the size and scope of your
commercial real estate project.
Just
like in school, “Do your homework.”
This
article was brought to you by Larry Eliason, a commercial Broker with Butts
Commercial Brokers in Raymond and serves the Greater Sebago Lakes Region.
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