Commercial Real Estate's Biggest Operating Costs

Written by: Commercial Real Estate Inspectors, LLC

What Are the Biggest Operating Costs of Owning a Commercial Property?

When you are considering purchasing, leasing, or investing in a commercial property, you need to know just how much it will cost to operate the premises. Operating costs for a commercial property can be astronomical if you do not know the condition of the building and anticipate how much it will be to maintain.

At Commercial Real Estate Inspectors, LLC, we provide RISK Assessment Reports to help individuals who are planning to purchase or lease a commercial property understand the condition of the building and the expected life of each system. Our comprehensive report covers a 5-year breakdown of costs to the buyer for the major systems that make up the property. 

If you are considering purchasing, leasing, or investing in a commercial property in Los Angeles or the surrounding areas, contact our office at (818) 957-4654 to schedule an appointment. 

What Are Operating Costs for a Commercial Property?

The operating costs of a commercial property are the general expenses that it takes to keep the building running. Things like utilities, property taxes, and property maintenance are all considered operating costs. These costs can vary greatly depending on the size, condition, and use of the property. 

Operating costs may include but are not limited to:

  • Property taxes and insurance
  • Utilities (electricity, sewer, and water)
  • Maintenance and repairs
  • Property management
  • Administrative fees
  • Janitorial services
  • Other Common Area Maintenance (CAM) expenses

In order to calculate what your operating costs will be for a specific commercial property, you will need to know what condition all of the systems are in. For instance, you will need to factor in whether you will need to replace the HVAC system in a building over the next five years. Failing to factor in these costs can cause your operating expenses to become unaffordable.

What Are the Biggest Operating Costs?

The biggest operating costs for a commercial property tend to be those that you do not plan for. A leaky roof or structural problem can cost turn a once profitable investment into an unsuccessful venture. The best way to ensure that you properly budget for all operating costs is by inspecting the condition of the building and all of its critical systems. 

What Are the Five Critical Systems?

There are five major systems in any commercial property. These five systems can cause substantial problems if not properly inspected and maintained.

The five critical systems in a commercial property include:

  • Electrical systems
  • Heating and air (HVAC)
  • Roof
  • Plumbing systems
  • Structure

In order to understand the potential operating costs now and in the future, you should understand how much life each of these systems has left in them and the replacement cost down the road.

What Is a RISK Assessment Report?

At Commercial Real Estate Inspectors, we offer a comprehensive RISK Assessment Report. The RISK Assessment Report provides potential commercial property owners with the “useful life and replacement costs” of the critical systems of the building over a five-year period. It can prove essential in helping you adequately assess what the operating costs will be of a commercial property. 

Purchasing a Commercial Property in LA? Contact Our Office.

Are you considering purchasing or leasing a commercial property in Los Angeles? Contact our office at (818) 957-4654 to schedule an appointment. We have over 100 years of combined experience.

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