Preparing a Commercial Property for Sale in Southern California: What Owners Should Address Before Listing

Preparing a commercial property for sale involves more than determining an asking price and bringing the asset to market. Reviewing the property’s physical condition, documentation and potential uses before listing can help owners identify issues early, reduce transaction delays and provide buyers with more complete information from the start.

Buyers will still conduct their own due diligence during escrow. The advantage of preparing early is knowing what issues may exist before the property is under contract, when there is more time and flexibility to address them.

ASSESS BUILDING CONDITION AND DEFERRED MAINTENANCE

For office and industrial properties, owners should understand the condition of major building components buyers are likely to evaluate, particularly the roof and HVAC systems. Parking lots, exterior areas and other visible signs of deferred maintenance should also be reviewed.

Addressing necessary maintenance before listing can improve marketability and reduce the number of items that become negotiation points during escrow. The priority is to identify issues most likely to affect how buyers evaluate the property or the terms they are willing to offer.

For industrial properties and land, environmental due diligence should also be considered early. A Phase I Environmental Site Assessment can take several weeks to complete. Completing one before listing can identify environmental concerns before they have the potential to disrupt a transaction.

PREPARE LEASE, RENT ROLL AND FINANCIAL DOCUMENTATION

For income-producing properties, sellers should have current financial information and complete lease documentation organized for buyer review.

An accurate rent roll and complete lease files allow buyers to evaluate in-place income and lease obligations. Owners should also review leases for provisions that could affect a sale, including rights of first offer, rights of first refusal and options to extend.

A right of first refusal, for example, may require an owner to give an existing tenant the opportunity to match an offer from another buyer. The owner and brokerage team should understand those provisions before accepting an offer—not after the property is already in escrow.

CONFIRM ZONING, PERMITTED USES AND REDEVELOPMENT POTENTIAL

Owners should also understand the property’s zoning, permitted uses and potential alternative uses before marketing begins.

This is particularly important for land and redevelopment opportunities, where allowable uses can influence both value and the pool of prospective buyers. Speaking with the local planning or community development department can help clarify what can and cannot be developed on a site.

Zoning can matter just as much for an improved property. An industrial building that allows another use or future redevelopment may appeal to a different buyer than one interested solely in its current use. Understanding those possibilities can influence how the property is positioned and who it is marketed to.

PREPARATION CAN REDUCE SURPRISES DURING ESCROW

The goal is not to eliminate every issue that may arise during due diligence. Buyers may still request repairs, credits or additional information. The advantage is knowing as much as possible before the property goes under contract, when owners have greater flexibility to address issues on their own terms.

Considering a commercial property sale in Southern California? GM Properties’ Brokerage team helps owners evaluate positioning, prepare properties for market and navigate the transaction process. When operational or property-level improvements are needed before a sale, the firm’s Property Management and Asset Management teams can also help address issues that may affect marketability and long-term value.

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