Also referred to as a user premium, an occupant premium is the price an occupier of commercial real estate will pay compared to a commercial real estate investor.

As both occupiers and investors “invest” in the commercial real estate, the distinction I draw here is an occupier owns the building – owner occupant – and operates a business from the building versus an investor who owns the building, doesn’t occupy it, and relies upon the rent paid by a tenant to underpin his investment.

Historically, owner occupants pay more for commercial real estate than investors – in some cases 20-25% more. So why would that be the case? I believe the following factors motivate the pricing difference.

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An original post on on September 2, 2016 written by Lee & Associates’ Allen Buchanan in Location Advice – California Businesses