How to Evaluate a Commercial Property
Evaluating a commercial property means looking past the listing photos and running the deal through a consistent set of checks. In Rochester and Macomb County, where buildings range from 1960s industrial to new mixed use, a structured evaluation catches the problems that hit year two operations hardest.
The financial picture comes first. Request the rent roll, trailing 12 months of operating statements, copies of every lease and amendment, utility bills for the last year, the most recent property tax bill, and any capital expenditure history. Reconstruct NOI from those documents rather than trusting the listing package. The gap between a broker’s pro forma NOI and the NOI a new owner actually achieves is often 10 to 20 percent, and almost always in the seller’s favor.
The physical condition comes next. Walk the building with a contractor or building engineer who knows Michigan commercial construction. Focus on the roof, which on commercial flat roofs in Macomb County usually lasts 20 to 25 years before needing full replacement. Check the HVAC systems, especially rooftop units and their age tags. Look at the parking lot for cracking, alligatoring, and drainage issues, all of which get worse fast under freeze thaw cycles. Check for water intrusion at exterior walls, around windows, and at roof penetrations.
Environmental due diligence is not optional on industrial property. Most Macomb County industrial buildings have manufacturing histories, which means a Phase I environmental report needs to run. If the Phase I flags any concerns, a Phase II with soil and groundwater sampling may be needed. Environmental issues can kill deals or force significant price reductions, and they can expose buyers to liability they did not sign up for. Lenders require Phase I reports on most industrial loans for this reason.
Tenant quality is the piece that gets overlooked most often. Reading the rent roll is not the same as evaluating the tenants. A building with strong in place rents from weak tenants is not really earning what the rent roll shows. Pull financial statements where possible, check how long tenants have been in place, look at payment history, and consider industry trends. A building full of small contractors is a different risk than a building leased to a single Fortune 500 logistics user. Both can work, but they deserve different cap rates.
Title, zoning, and survey issues show up in the last phase of evaluation. Title exceptions like easements, setback violations, or unrecorded leases can constrain what a buyer does with the building. Zoning needs to match intended use. Survey issues can reveal encroachments or acreage discrepancies that affect value. TDG Commercial helps clients work through each of these stages, coordinating with attorneys, inspectors, and environmental consultants in the Rochester and Macomb County market. As top commercial realtors in Rochester MI, the team ensures every question gets asked and answered before contingencies expire.
A final word on evaluation timing. Most purchase agreements in the Rochester and Macomb County market allow 45 to 60 days for due diligence, which is tight when environmental reports, surveys, and lender underwriting all run simultaneously. Smart buyers line up their consultants before the LOI gets signed, so the Phase I firm, contractor, attorney, and lender are all ready to engage on day one of the due diligence period. That prep work is the difference between a calm process and a scramble to renegotiate a due diligence extension at the last minute.
