Commercial Risk Assessment

Investment commercial real estate has many risks that must be weighed against potential returns. While the major businesses that qualify for the business immigration program are based on brick-and-mortar business model and therefore require an industrial site, retail site, office or any other commercial real estate to run the business, our commercial real estate advisers provide the relevant insight and due diligence to assess various risks associates with the acquisition of such real estate.

Lease Renewal Risk
It is the risk that the lease renewal option is not available at the end of the lease or the lease period & renewal options currently available cumulatively doesn’t provide the investor with a time span required to grow the business and develop workable exit strategies.

Demolition Risk
Government demolition policies varies location to location and possess serious threats to the financial viability of the investment while making decision to invest in a commercial real estate.

Location Risk
Real estate investment ultimately depends on having the right type of property in the right location. Cities, however, act as dynamic and evolving organisms. What is a prime location for office and retail space today may be empty 20 years from now. Location risk comes from the external environment and the contribution that the neighborhood makes to a property’s value. Changes in city growth or transportation patterns or reductions in public goods and services can all negatively impact the desirability and value of a particular property.

Space Market Risk
Property owners purchase real estate with a specific expectation about market rental rates and the demand for space over the investment holding period. Space market risk refers to the probability that those expectations are incorrect. As an example, consider the potential impact of a global pandemic on long-term corporate behavior with respect to remote working. If corporations suddenly start allowing a large percentage of workers to engage in remote working contracts, the market demand for office space will dramatically decrease from previous forecasts. This unexpected change in demand conditions is space market risk and uniquely impacts real estate assets.

Construction Risk
Any time a property undergoes construction, there is an additional source of risk to the property owner. Construction risk applies whether there is a new development or a significant renovation. The construction project may take longer than expected and delay expected rental income, cost more than the budget estimate, or expose previously unknown defects in the property that require additional time and expense to remedy. All of these scenarios result in a reduction in expected cash flow for the property owner.