Commercial properties are typically considered more complex to sell than residential homes. However, there are numerous potential ways to sell an office, shop, warehouse, plot of land, or premises with an established use—from a hotel or restaurant to a pub or multi-use property like a retail shop with an apartment above.
Commercial properties appeal not only to specific buyers, often investors, developers, and experienced business owners, but also to start-up companies, private individuals and pension funds who will consider a strategically located premise or one within the infrastructure of an industrial park an excellent opportunity.
Clive Emson’s experienced commercial auction team have put this concise guide together to showcase the step-by-step process of selling a commercial property and contrast some of the possible routes to achieving a sale.
Selling Commercial Property: Key Takeaways
- Most commercial property sellers have two priorities: to finalise a sale as quickly as possible to free up capital for other projects or enable a subsequent purchase to proceed, and to achieve the highest possible price.
- The best advice is to speak with an auctioneer or agent with proven expertise in commercial property sales, since the way your premise is marketed and the negotiations with buyers are pivotal to securing the price and turnaround times you want.
- And a third key-takeaway from this article
Preparing a Commercial Property for Sale
Preparation is essential since you'll need to ensure you have all the necessary documentation in place. Commercial property owners should consider the following as a first step:
Their overarching goals: Setting sale objectives, whether speed, pricing or timing, may be key, especially if you need to sell one commercial property to finance the purchase of another.
Business relocations: If a current business is trading from the premises or you are using the building to run your own business, you may need to think about whether you can clear the space before the sale or how to manage the relocation to enable the property to be sold.
Commercial tenants: Should you wish to sell with a commercial tenant in situ, you'll need to verify that the tenancy agreement and terms of the sale have been confirmed and clarified in advance to avoid any potential disagreement.
Repairs and cleaning: Carrying out any worthwhile repairs or dismantling shelving or racking may need to be completed before you market your property for sale.
Documentation: Before the premise is advertised, you'll usually need to have the title deeds, any applicable lease agreements, compliance paperwork such as fire safety and asbestos logs, and the property Energy Performance Certificate (EPC) ready.
Commercial properties sold at auction are listed as standalone premises or plots of land rather than businesses sold as a going concern with a property asset included.
Choosing a Professional to Manage Your Commercial Property Sale
The next step is to decide whether to list your premises through a commercial agent or sell your property at an auction.
For many owners, the biggest decision-making factor is timing because a property auction has a set timeframe, an established auction start and end date, and a high degree of certainty that you will achieve a sale at or above your minimum price.
Once the auction hammer falls, the sale is binding, and the final completion, handover of keys, and transfer of funds take around four weeks from that point.
Analysing the Advantages of Selling Commercial Property at Auction
Aside from the speed of a commercial property auction, auctioneers manage sales throughout the year and have ample expertise in marketing or advertising a business plot or premise.
Some of the compelling benefits are as follows:
The reach of an auction is extensive, with networks of engaged buyers, investors, and business owners who frequently look for premises to rent out, add to a commercial asset portfolio, or from which to operate their businesses.
The growing and sustained interest in auction sales, particularly from busy professionals and developers who are ready to proceed swiftly and prioritise the efficiency of an auction process.
The ability to attract competitive bidding, especially for high-demand commercial lots or those in industrial parks or town centres where business sites are scarce or where it is generally very difficult to gain consent to convert a residential property into a business space.
Auction sales are particularly valuable for commercial property sellers who might have an unusual plot, either because the size and scale of the land or buildings are extensive or because the building is in need of renovation.
Find out how much your commercial property will sell for at auction.
Let us know the details of your commercial property and we’ll provide you with our recommendations for the guide price and reserve price
Setting an Asking or Listing Price for a Commercial Property
Once you've decided on the best way to sell your property, you’ll need to evaluate the selling price. This can be a difficult decision since you’ll neither wish to outprice interested and genuine buyers nor set the price too low and risk accepting a lower price than you might have achieved.
Of course, Clive Emson's auctioneers can assist with pricing by advising on the current market, values achieved for similar properties or those in the same area, or reviewing interest from commercial buyers. After that, you'll move on to the paperwork and conditions of sale to enable your agent or auction house to begin the advertising and viewing processes.
Marketing a Commercial Property for Sale
Before the property is actively marketed, you’ll usually need to work through the following tasks:
Working with your sales representative to collate the particulars, legal documentation and videos or photography, which are used in marketing materials, and to provide downloadable auction packs for prospective buyers to download.
Putting together all the information potential buyers will need, from EPCs and details of the business rates, planning permissions and local searches.
From there, a standout benefit of working with an auctioneer is that we'll advise if there is strong interest and high volumes of legal pack downloads.
This can be a good indication that the initial pricing might be lower than the property could sell for - and that you might wish to revise the pricing before the auction date.
In some scenarios, buyers may raise questions or submit enquiries. The general advice is to offer as much information as possible since this can help a buyer determine whether the property is a great investment asset or clear up any queries about things like the business rates payable and whether there is consent to change the use of the building, for example.
Liaising With Tenants When Selling a Tenanted Commercial Premises
Unlike alternative sales methods, auctions often feature tenanted commercial properties, which can appeal to buyers and investors who already have a local portfolio or specialise in a specific market or sector and value the ability to earn an immediate revenue stream.
As the seller, we’d advise you to:
Provide comprehensive information about your current tenants, including lease agreements and rental income, any other contracts or conditions relevant to the tenancy, and the business or trade of your commercial tenants.
Communicate with the tenants throughout, ensuring they are aware of the sale, happy that viewings may be conducted, and informed when a new owner has been established to ensure both parties can stay in touch.
Manage the legal and technical aspects of transitioning the tenancy to the buyer, where your solicitor will normally handle tasks such as transferring the tenancy deposit to the new owner once the sale is finalised.
Most commercial properties are sold at auction against a set of terms, and although contracts are normally exchanged as soon as the hammer falls, it's important to complete all the preparations to ensure there is no likelihood of a conflict between any party.
Related Reading: Can you sell a tenanted property?
The Legal and Contractual Aspects of Selling a Commercial Premise
Regardless of how you decide to sell your commercial property, you’ll need to engage a solicitor who has experience in managing commercial sales – they can provide services such as:
Reviewing the terms of the sale and advising whether there are any clauses or conditions you need to examine or negotiate on.
Completing searches to help with compiling the legal pack and drafting or reviewing contracts.
Transferring ownership of a tenanted commercial building and the deposits of agreements held between you and your existing tenant.
Registering the exchanges of contracts and completion and ensuring that when funds have been transferred, the change in ownership is properly recorded.
Some commercial sellers may also need to consult an accountant or business adviser to ensure they are prepared for any possible tax implications, such as Capital Gains Tax liabilities on the profit made or VAT levies linked to the property sale.
Professional, Independent Guidance on Selling a Commercial Property at Auction
We hope this guide has highlighted some of the tasks involved in selling a commercial property, from setting an initial selling price and deciding on the optimal sales route to handling the legalities through your solicitor.
If you’d like further advice about selling your commercial property, the contrasts between an auction and an alternative sales method, or the benefit of an auction sale, you are welcome to contact the Clive Emson team at your convenience.
