Before Reducing the Price of a Commercial Property
Price may be the problem—but it should not automatically be assumed to be the problem. Before reducing the asking price, review what the market response is actually telling you.
Pricing is Important - but It Is Only Part of the Analysis
A price adjustment may be appropriate, but it should follow a careful review rather than become the automatic response. Commercial property value may be influenced by income, comparable sales, condition, zoning, permitted uses and the type of buyer most likely to value the property. Understanding these factors helps determine whether the price, positioning or marketing strategy needs to change.
What was the market's feedback?
- Number and quality of inquiries
- Property tours
- Buyer and broker feedback
- Offers received
- Reasons interested buyers did not proceed
The results of the previous listing activity can help identify what may need to change. Qualified inquiries, property tours, buyer feedback and offers are often more meaningful than the total number of people who viewed the listing.
Was the property positioned correctly?
Where and how the property was marketed are critical to reaching the right buyer. Depending on its income, use, location and potential, the property may appeal to several different buyer groups:
- An income-producing investment
- An owner-user opportunity
- A redevelopment opportunity
- A strategic acquisition for a neighboring owner
- A value-add opportunity
The same property may need a different story for each buyer group.
Did buyers receive complete information?
Serious commercial real estate buyers need complete, well-organized information to evaluate the property and make an informed decision.
- Income and operating expenses
- Rent roll and lease details
- Property condition
- Zoning and permitted uses
- Recent improvements
- Deferred maintenance
- Development or expansion potential
Was the right buyer targeted?
The objective is not simply to place the property online. It is to present the right investment or ownership opportunity to the right buyers.
When a price adjustment may be appropriate
A price adjustment may be appropriate when market conditions or property fundamentals indicate that the asking price is not supported. Factors may include:
- Comparable sales do not support the asking price
- The property’s income does not support investor expectations
- Required repairs or capital improvements affect value
- Competing properties offer better economics
- Financing conditions have changed
Before reducing the price or returning the property to the market, a fresh, objective review may help identify what prevented qualified buyers from acting. If selling is still your goal, I would be pleased to provide a complimentary Commercial Property Sale Review and discuss what might be done differently.