10 Tips When Making an Offer for a Commercial Property 

Putting forward an offer for a commercial property is a crucial part of buying a commercial property. For the inexperienced or new prospective buyer this can be challenging and the difference between successfully acquiring a property or not.

We use our many years of experience in the commercial property market to highlight 10 tips when making an offer for a commercial property.

1. View the Commercial Property

An obvious one perhaps, although something many buyers don’t always do. You must always view the commercial property.

Firstly, this is important as you should be aware of what the property is and familiar with the available accommodation. Ideally view the property on a bad weather way day so you see the property at it’s worst!

Secondly from the seller and seller’s agent perspective, if you view and engage in the process you are taken much seriously. An offer from a buyer who hasn’t viewed, may be viewed sceptically as such a buyer isn’t making much effort and may back out.

Viewing adds credibility that you are serious and also means you can identify any potential concerns early on.

2. Put forward the Commercial Property Offer in Writing

Always, always, always put an offer forward for a commercial property, in writing so there is a clear record. Whilst you may decided to initially put forward an offer forward verbally, follow it up in writing.

There’s a number of reasons why you should put your offer forward in writing:

• If you put forward an offer verbally, the detail of the offer may be lost over time. Put it in writing and clarify the necessary details.
• If you make an offer, you already create a sense of urgency for the vendor to respond.
• A written offer is far more serious and professional.
• A written offer creates a record on the file, and the vendor’s agent has an obligation to ensure the vendor is aware of that offer.
• With a written offer you can set out the context of your offer, including conditions, offer amount, buyer, timing etc. The vendor can therefore better understand the true offer.
• If you make an offer in writing, and it’s rejected or the vendor proceeds with another party and the deal falls apart, with a written offer there is a higher chance that the vendor / vendor agent comes back to you if the property comes back on the market. A verbal offer will be forgotten.

3. Understand the Reason / Circumstances why the Commercial Property Vendor is Selling

Understanding the circumstances of the vendor is useful as it’s means you can tailor your offer for a commercial property for that vendor.

Say a garage owner in Brixton, South London is marketing his business premises freehold, but by asking questions it turns out the vendor would like to have a period to wind down the business meaning they are open to conditional offers with a lengthy period exchange and completion. That means you could offer to exchange quickly and then complete in 6 months or longer, allowing you to get planning for a change of use or arrange funds for the purchase.

Or say if another vendor will only consider unconditional offers for a freehold office property in Kensal Green. By understanding the circumstances of the vendor, you can be specific in putting forward an offer that has a higher chance of being accepted and working for you and the vendor.

4. If you make a Low Offer on a Commercial Property, back it up!

Say you decided to make an offer of £600,000 on a mixed use investment in Leyton, but the vendor is wanting to achieve £750,000.

If you make an offer of £600,000 with no further information, a vendor is very likely to reject the offer out of turn. However if make an offer with justification and evidence to back up your ‘low offer’ with reasonable information as to why you have made the offer you have, then you have a higher chance that offer will be taken much more seriously. Backing up an offer adds credibility.

5. Includes details of the Purchaser of the Commercial Property

Clearly include details of the buyer (personal name, ltd company, etc) and ideally confirmation of any track record of previous purchases. This adds credibility and transparency to the process.

6.) State the Offer amount in Figures and Words

Including the offer amount you making for the commercial property makes it clear so there is no less chance of confusion later on.

Also make clear is your offer plus VAT or assuming no VAT is payable. This is a common mistake which gets raised later in transactions when buyer and sellers overlook at it at the start. Check and make clear what the status is at the start.

7.) Include details of your acting Commercial Property Solicitor

By including your commercial property solicitor details adds a level of seriousness and credibility that you are ready to transact. If a buyer has to scrape round to find a solicitor last minute, it can sound alarm bells with a vendor or vendor commercial property agent. Making clear you have a commercial property solicitor ready to act and engaged will help.

8.) Confirm the Funding to Complete the Commercial Property Purchase

Clearly stating how the commercial property purchase is to be funded and proof will significantly aid the chances that a vendor will take your offer seriously. Is your offer to be funded by cash, bank lending or by third party investor funds. However your purchase is to be funded, provided reasonable clear information providing proof will greatly help. For example if an offer is cash, then it is usual to provide documented proof of funds.

9.) Timescales you can Exchange Contracts and Complete a Transaction

When you make an offer for a commercial premises, it wise that you include details as to when you would be able to exchange contracts (following receipt of title documents from the vendor’s solicitor), and expected completion date.

It wise to speak with your commercial property solicitor on this to access what is realistic, but also bear in mind what the vendor is ideally seeking. Not all vendors necessary demand speed, so it is important to understand the vendors circumstances and competition for the property.

10.) Confirmation of any other Conditions relating to your Commercial Property Offer

Detailing any conditions related to your offer is key. If you are making an offer solely subject to contract state that. However if you are looking to make an offer subject to survey, planning or any other condition, it is best to make that clear. This is transparent and saves time later.

Of course you must consider the market conditions and buyer competition. If you are bidding on a mixed used investment with development potential in Peckham in a strong market, then you may need to consider a different strategy compared to a property with less buyer competition.

We hope those 10 tips help when you are considering putting forward an offer for a commercial building or land. When making a offer on a freehold or long leasehold commercial property, there are many aspects to consider. Taking time to put forward a reasoned, considered and serious offer gives the best chance of securing the property successfully.

Greater London Commercial can can help you find and offer on a commercial property! Contact Greater London Commercial on 01708 973700 to discuss how we could assist you with our commercial estate agency services.