Real estate investing offers a number of different paths, and that’s what makes it so accessible.
For anyone considering an investment in a commercial property, there’s a lot of good news. These types of investments offer a lot of potential, both in recurring and consistent rental income and long-term appreciation. California is a large state with a number of diverse markets and property types. Commercial properties can include everything from office space to industrial warehouses to retail spaces. A lot of commercial investors are turning to mixed-use properties and similar spaces.
California has a huge economy, a number of different industries, and world-class cities. The commercial real estate markets in this state offer countless opportunities across a range of asset types.
This market isn’t for everyone, however. It’s complex. It’s heavily regulated. It’s highly competitive. For anyone planning to purchase a commercial property, there are several critical factors that must be understood in order to succeed.
At Bell Properties Commercial Real Estate, we specialize in helping investors of all types navigate the local markets in California. We’ve put together a comprehensive guide on what California real estate investors need to know when purchasing commercial property.
Residential Investor? Get to Know the Nuance to Commercial Investments
A lot of residential real estate investors come to us looking for the best way to diversify their portfolio. Commercial investments can help. But it’s important to remember that commercial real estate is fundamentally different from residential real estate. Buying a commercial property typically involves larger sums of money, longer due diligence periods, and more sophisticated contracts. Many owners also find that commercial assets are usually income-producing properties where value is driven by cash flow and tenancy rather than comparable sales.
Here’s what we tell our investors are the key distinctions between commercial properties and residential homes:
Valuation. Commercial properties are valued using income-based approaches (NOI, cap rate), not just comps.
Tenancy. Commercial tenants often have longer lease terms and different legal protections than residential tenants.
Financing. Loans require higher down payments and more stringent underwriting.
Any investor who has rented out a residential property in the past can understand the mechanics around dealing with tenants, keeping up with maintenance and updates, and identifying opportunities. Buying a commercial property is different, however, and needs to be treated as such. Working with a property management company like Bell Properties can help. We have experience in both the residential and the commercial investment sectors and markets.
Zoning and Land Use Are Crucial in California
Before buying a commercial property, it’s important to understand what the acquisition means for zoning laws and land use ordinances.
California cities and counties have some of the most nuanced and restrictive zoning laws in the country. Whether the property in question is a retail space, office building, or industrial property, it’s imperative to understand how the property is zoned and what restrictions or future changes might affect its use.
We recommend a visit to the local planning department. Or, check the property’s GIS maps to verify zoning. It’s also important to understand conditional use permits (CUPs) or restrictions that could limit development or leasing. We always recommend that potential commercial buyers look up any upzoning opportunities in areas targeted for growth or redevelopment.
Not sure where to start? Contact us at Bell Properties Commercial Real Estate, and we’ll do the zoning research that’s necessary. And remember: just because a property is being used a certain way now doesn't mean it’s legal or grandfathered in. We always verify zoning status before proceeding.
Conduct Robust Due Diligence Before Making an Offer
Due diligence in commercial real estate is extensive. It includes financial audits, legal reviews, physical inspections, and environmental checks. In California, environmental due diligence is especially important due to stringent state laws and potential contamination issues.
Investors working with us know that our due diligence checklist often includes:
Financial Records. Rent rolls, profit & loss statements, tenant estoppel certificates.
Lease Agreements. Review all active leases. Understand escalation clauses, renewals, and maintenance responsibilities.
Title & Legal. Order a title report and look for liens, easements, or CC&Rs (covenants, conditions, and restrictions).
Physical Inspection. Get a commercial property condition assessment (PCA).
Environmental. Order a Phase I Environmental Site Assessment (ESA) to rule out contamination.
Seismic Risk. California properties are susceptible to earthquakes—consider seismic retrofitting and review local hazard maps.
There’s a lot to manage, and that’s why a professional partner is so necessary. When investors let us take the lead, they do not have to worry about any of it.
Understand California’s Unique Tax Landscape
California’s Proposition 13 caps property tax increases to 2% annually unless the property is sold. Once a commercial property is purchased, it is reassessed at market value, which can lead to a significant increase in annual taxes.
Although Proposition 15 (which would have removed Prop 13 protections for commercial properties) was defeated, anyone buying a commercial property now should understand that future ballot initiatives may revisit this issue. Investors should stay informed about policy changes that could impact tax liability.
There are also transfer taxes. Many California cities, including Los Angeles, San Francisco, and Oakland, impose transfer taxes on real estate transactions. Some have passed mansion taxes on high-value commercial transactions, such as LA's Measure ULA.
It’s important to work with a tax attorney or a CPA when buying commercial real estate. We can put investors in touch with a reliable professional when a referral is needed.
Evaluate Location-Specific Market Dynamics
California is not one single homogenous market. It’s a collection of micro-markets that behave differently based on industry presence, local regulations, and economic cycles. Get to know the dynamics before buying commercial property. For example, in San Francisco and Silicon Valley, there’s a lot of tech-driven demand. This means expensive sites and competitive offers. Industry fluctuations will matter to anyone buying a commercial or retail space.
In Los Angeles, things are a bit different. The commercial economy is more diverse. Commercial tenants hoping to rent space could come from the entertainment or logistics industry. There’s been a rising demand for industrial space. Meanwhile, the inland empire is really the hottest market for industrial and logistic commercial spaces. The state is large. The markets are diverse.
Analyze not just the city but the neighborhood. Gentrifying areas, transit corridors, and designated opportunity zones can yield higher returns.
Financing a Commercial Acquisition
Securing financing for commercial properties is more involved than for residential purchases. Lenders evaluate not only your financials but also the property’s income potential. Be prepared to provide:
20–35% down payment (sometimes higher)
Detailed business plan or investment pro forma
Appraisal and property inspection
Tenant leases and income history
Popular financing options include conventional bank loans, private or bridge lenders for value-add deals, and CMBS loans or an SBA 504 or 7(a) loans (for owner-users).
Some cities and counties in California offer incentives, tax credits, or financing support for commercial developments that meet public goals—such as affordable housing, green building, or adaptive reuse.
Commercial Tenant Regulations and Lease Structuring
Buying a property with tenants in place requires a good understanding of California’s commercial tenant laws, which are more flexible than residential laws but still require careful attention. When there’s a tenant already in place, property management is especially essential. Contact us at Bell Properties Commercial Real Estate if you’re buying an occupied commercial space. We can manage the relationship effectively.
When it comes to leases and tenant management, consider:
Triple net (NNN) vs. gross leases
CAM (Common Area Maintenance) charges
Responsibility for repairs, taxes, and insurance
ADA compliance—property owners can be liable for violations
Review all existing leases with your attorney and determine if you’ll be inheriting any potential liabilities.
Regulatory Compliance and Environmental Laws
California is one of the most environmentally regulated states. From energy codes (Title 24) to water conservation requirements, investors have to know that a building complies with local, state, and federal laws before buying.
Consider:
SB 1383 compliance for waste management
Green building codes and energy benchmarking requirements in large cities
Stormwater runoff regulations
Solar mandates for certain new developments
Even legacy properties may face retrofitting mandates, particularly in places like Los Angeles, where soft-story buildings are being targeted for seismic upgrades.
Success Secret: Work With an Experienced Team
We invite anyone preparing to buy a commercial property to contact us at Bell Properties Commercial Real Estate. Don’t do everything alone. A successful commercial acquisition in California requires a team of experts, starting with a local property manager.
Hiring local professionals familiar with California’s real estate, legal, and regulatory frameworks is essential.
Purchasing commercial property in California can deliver strong long-term returns, but it requires deep due diligence, a keen understanding of the market, and the ability to navigate a uniquely complex regulatory environment. From environmental risks and shifting tax laws to tenant issues and market cycles, successful investors don’t just rely on location. They rely on preparation, analysis, and expert guidance.
Take the time to build a strategy, assemble a team, and approach the process with a long-term, informed perspective. We can be your secret weapon. Contact us at Bell Properties Commercial Real Estate, and we’ll make sure you’re set up for success.
