Due diligence is an integral part of commercial real estate transactions. Whether you are investing in commercial real estate or buying for your business, you must investigate the property. With that said, there is a lot to cover with due diligence in CRE. There are many types of due diligence for commercial real estate.

This two-part post will explore the different types of due diligence in CRE. Read on to learn more.

3 Types of Due Diligence in CRE

Physical Due Diligence

Physical due diligence is the most straightforward form of CRE due diligence. It involves a physical inspection and assessment of the property. It requires a top-to-bottom inspection of all structures. The inspection will also account for fire safety, parking lots, building systems, infrastructure, and more.

Walking the property and checking every building is a good start. However, there is a lot to consider with physical due diligence. You should hire a building inspector or structural engineer to perform a thorough inspection. Depending on the property type, you may even need to hire specialists to inspect different parts of the property.

Legal Due Diligence

Buying commercial real estate may involve various legal issues. For example, the jurisdiction may have different CRE laws and regulations. One basic point is the title examination. Investors should have a title company perform a title search for issues like unpaid taxes, liens, or ownership disputes. Most investors will only buy a property if the title is clear.

Due diligence may require various other legal considerations depending on the property type. For example, you should verify all the occupancy permits for the property. You should also investigate local zoning and land use laws. A land survey can also be helpful when buying commercial real estate. Investors should consult an attorney to understand all the steps they should take in legal due diligence.

Environmental Due Diligence

With environmental due diligence, you assess issues with the land on the property to discover any environmental issues. For example, you would look for harmful substances or other contaminants that may affect the property and surrounding environment.

A typical step in this regard is to order a new phase I environmental site assessment. With a phase I ESA, you investigate the current and historical condition of the property. If any issues arise, it may be necessary to order other assessments.

These are three types of due diligence in CRE transactions. Stay tuned for part two of this post to learn about the next three.

Are you interested in commercial real estate in Columbus, GA? Click here to contact the Cummings Commercial Team. We are experts in commercial real estate, and we can help you through every step of buying or selling. Reach out now to learn more about how we can help.

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