Commercial facility
| Commercial facility |
|---|
| See also |
Commercial facility (otherwise: commercial property or commercial real estate) is an asset that is meant to generate income for the owner. Commercial facilities have meaningful impact in economic growth and development of the city. Demand for commercial facilities comes from the economic activity of companies. Since land and buildings are factor inputs in productive action, demand varies across time (as technologies of production evolve) and space (distinct locations possess advantages for different types of usage of land[1].
Categories of commercial properties
Commercial facilities can be divided into different categories, that are mostly related to sectors of employment. We can distinguish[2]:
- Retail buildings,
- Office Property,
- Business opportunity,
- Industrial Facility,
- Ranch or Farm,
- Shopping Center,
- Medical Property,
- Multifamily building,
- Vacant Developable Land.
Every type of commercial real estate finds different usage, and each has its own way to make money from.
Commercial facility’s prices
Commercial facilities have diverse and troublesome financial features in comparison to different asset classes. The value of commercial real estate in relation to separate types of fixed capital has increased, because the cost of equipment investment goods in the world, has been decreasing promptly since the 1960s. The price of commercial properties is mostly decided by its income-generating ability. The price is also determined by land plot value, and cost of the building. Improvement value or rental price might also be used in measuring value of commercial real estate[3].
Devaluation of commercial facilities
Studies have shown, that there exists a contact between exchange rate volatility and returns of commercial facility investments. Considering tax policy, commercial properties have a tendency to depreciate in a fairly geometric sequence, with a rate between 2% to 4% of the enduring price of a building per year. When it comes to non-residential land, the highest percentage of devaluation is observed in office facilities and retail buildings, and industrial properties experience the slowest loss of value[4].
Examples of Commercial facility
- Office Buildings: Office buildings are purpose-built structures that are designed to house office workers and provide them with a place to work. These buildings can range in size from small, single-story structures to multi-story buildings that house thousands of workers. Office buildings are typically located in business districts or near other businesses, public transportation, and other amenities.
- Shopping Centers: Shopping centers are large, multi-use facilities that contain a variety of retail outlets, restaurants, and other services. Shopping centers can range from small, single-building projects to large, sprawling complexes. Shopping centers are often located in areas with high-traffic and close proximity to residential areas.
- Hotels & Resorts: Hotels and resorts are multi-use facilities that provide overnight accommodation, conference facilities, and other amenities. These properties are often located in desirable areas and are designed to attract both business and leisure travelers. Hotels and resorts typically offer a variety of amenities, such as restaurants, bars, entertainment, and recreational activities.
- Industrial Parks: Industrial parks are large, purpose-built facilities that are designed to house manufacturing, warehousing, and other industrial operations. These properties are typically located in areas with easy access to transportation infrastructure and other amenities. Industrial parks are often designed to provide a safe, secure environment for businesses to operate in.
Advantages of Commercial facility
Commercial facilities offer many advantages to businesses and investors. Some of the main advantages include:
- Increased Property Values: Commercial facilities can boost the value of surrounding property, making them attractive investments for property owners as well as businesses.
- Increased Business Activity: Commercial facilities can bring more businesses to an area, thus increasing economic activity and creating more jobs.
- Tax Incentives: Governments often provide tax incentives for businesses that invest in commercial facilities, making them attractive investments.
- Improved Infrastructure: Commercial facilities often require investments in infrastructure such as roads, sewer systems, and electricity, which can improve the quality of life in the area.
- Additional Amenities: Commercial facilities can offer amenities such as restaurants, shops, and theaters, which can improve the quality of life in the area.
- Increased Revenue: Commercial facilities can generate additional revenue for governments through taxes and fees, which can be used for public investments and services.
Limitations of Commercial facility
- Cost: Developing a commercial facility is expensive. The cost of land, construction materials and labor, taxes, insurance, and other associated costs can be prohibitive for some businesses.
- Location: Another limitation is finding the right location for the facility. Companies need to consider the local market, transportation infrastructure, access to resources, and other factors when selecting a suitable location.
- Regulatory Environment: Local governments may impose certain regulations on commercial facilities, such as zoning regulations, building codes, and environmental laws. Companies need to ensure that their proposed facility will meet all local regulations.
- Maintenance: Once the facility is built, the company needs to maintain it. This may include regular cleaning, repairs, and other upkeep tasks. This can add to the cost of owning and operating the facility.
- Security: Commercial facilities must be well-secured to protect the people and assets inside. This can include physical security measures such as locks and alarms, as well as cybersecurity measures such as firewalls and encryption.
- Liability: Owners of commercial facilities may be responsible for any accidents or injuries that occur on their property. They must also ensure that their facility meets all applicable safety standards.
A commercial facility can be approached from different angles:
- Infrastructure: Infrastructure is the physical elements of a commercial facility, such as its roads, telecommunications, water and electricity systems, etc. These are essential components for a commercial facility to function efficiently.
- Location: Location is key for any commercial facility, as it can determine the success or failure of the business. Factors such as proximity to resources and markets, availability of land, access to transportation, etc. are important considerations when choosing a location for a commercial facility.
- Financing: Financing is another important factor when setting up a commercial facility. It is necessary in order to purchase land, construct and equip the facility, and hire staff.
- Regulatory environment: The regulatory environment in which a commercial facility operates is also important, as it affects the conditions under which businesses can operate. This includes zoning regulations, taxation, and labor laws, among others.
In summary, a commercial facility is a complex entity with many components, from infrastructure and location to financing and regulatory environment. All of these factors must be taken into consideration when setting up a commercial facility.
Footnotes
References
- Ball M., Lizieri C., MacGregor B.D. (1998), The economics of commercial property markets, Routledge, London and New York
- Conti P., Harris P. (2008), Commercial Real Estate Investing For Dummies, Wiley Publishing, Indianapolis
- Keim L.K. (2007), The fundamentals of listing and selling commercial real estate, Infinity Publishing
- Tagg A. (2019), Technical Due Diligence and Building Surveying for Commercial Property, Routledge, Abingdon and New York
- Wang T., Wang Y., Zhao X., Fu X. (2018), Spatial distribution pattern of the customer count and satisfaction of commercial facilities based on social network review data in Beijing, China, "Computers, Environment and Urban Systems", Vol. 71, September 2018
- Yu H., Pang H., Zhang M. (2018) Value‐added effects of transit‐oriented development: The impact of urban rail on commercial property values with consideration of spatial heterogeneity, Papers in Regional Science, Vol. 97 Issue 4, November 2018
Author: Bartłomiej Bargiel
