A Google search of commercial real estate versus residential real estate will turn up results that place these two areas of specialization in close alignment. Without closer scrutiny, that comparison seems to make sense. Both residential and commercial agents work with real estate properties, but that is where the similarities end.

Commercial real estate agents in Canada may sell residential as well. However, the inverse is not true. Certified & accredited commercial agents and brokers have pursued extensive additional training. The Certified Commercial Investment Member (CCIM) designation, for example, is commercial real estate’s benchmark for achievement in this specialization.

Another example of the additional steps taken by commercial real estate professionals is the pursuit of a Chartered Commercial Property Surveyor accreditation. These professionals are registered with the Royal Institution of Chartered Surveyors (RICS) and can value and negotiate the sale and lease of commercial land or properties. A qualified and experienced surveyor has an excellent track record and must adhere to strict rules of conduct and best practices.

Why the Additional Training Matters?

As an honorable sales representative, commercial agents must provide the most ethical and competent service to their clients. It is their duty. In 1921, Ohio newspaper Mansfield News described Howard Herring of the North American Watch Company, stating that he “…walks the walk, and talks the talk….” The publication was emphasizing Herring’s ability to back up his words with action. Knowing how to walk the walk and talk the talk is essential for the commercial real estate professional. The lexicon of commercial real estate terms, for instance, includes words that do not exist in most residential lease or sale transactions.

While the terminology is one aspect, the nuances of commercial transactions can be extensive.

For lease transactions, there are several key commercial lease clauses to bear in mind, for instance, that are extensively used in lease agreements. Exclusivity and use provisions, expansion rights, rent escalation clauses, assignment/sublease clauses, and improvement and alterations clauses significantly impact the nature of a lease contract.

For sale transactions, it’s critical to ensure the cash flow of an investment property is understood and dissected by the agent before counseling their client on the next steps. While financial analysis is essential, other factors hold equal importance. Review of land for environmental contamination is one of those. Contaminated land can hinder development and the ability to secure financing.

Commercial Realtors Understand Commercial Needs

Beyond the mechanics of a commercial transaction, commercial real estate professionals must be experts in interpreting the business’s needs and identifying solutions for meeting those. For instance, retail clients want to be assured of foot traffic past their establishment. Investors in office space want to know precisely how a property will be marketed to minimize vacancies.

To effectively represent their clients, commercial brokers need to understand the fundamentals of a commercial offer to lease form and incorporate custom language to reflect their client’s specific needs. These are skills that come with years of practice and experience.

Other areas also need specialized knowledge. Property appraisals can be extensive on a commercial property and cost significantly more. The assessment is complicated by the income approach to value that uses the property’s income to estimate fair market value. The development, operation, and maintenance of a commercial property are unique. Because of this, finding comparable sales presents another challenge for valuation.

Commercial and residential appraisals look at different information. As you’d expect, this means the appraisal report is also different. The detail in a commercial appraisal can be overwhelming and extend to 100 pages or more. By contrast, most residential appraisals are usually not more than a small fraction of that size.

Engaging a Commercial Professional Is Ethical

In the end, the measure of any real estate transaction is the satisfaction of the client. Were there needs best served? Entering into a commercial transaction without the appropriate depth of knowledge and understanding can disservice the client and the real estate professional’s reputation.

If you are a residential broker with a commercial opportunity, seek assistance by partnering with a commercial firm. Creiland Consultants Realty is a full-service disciplined commercial real estate advisory firm based in Toronto, Ontario, that is ready to help.