Increasingly, developers and investors from the residential market—urban or tourist—are venturing into the world of commercial, corporate, and industrial assets in the Dominican Republic. The appetite is there: these segments promise profitability, portfolio diversification, and higher value per square meter. However, they also demand a completely different approach. Applying the rules of the residential market to this new terrain often leads to costly mistakes.
Here I share some of the most common ones I have observed in practice, as well as recommendations to avoid them from day one.
1. Apply residential criteria to products that operate with a different logic
One of the most common mistakes is assuming that developing a corporate building, warehouse, or retail space is simply scaling up a residential project. Nothing could be further from the truth. In this world, aesthetics are not the priority; operational functionality takes precedence: ceiling height, floor load capacity, electrical infrastructure, loading access, connectivity, location, access to public transportation, visibility, exposure, and more. Successful projects are not necessarily the most aesthetically pleasing, but rather the most efficient and adaptable in the short, medium, and long term, and for diverse types of businesses.
2. Not understanding the differences in sales and rental periods
In the residential market, it's common for properties to sell even before they're finished, while still in the planning stages, and to be occupied as soon as they're delivered, either by the end user or by a short- or long-term tenant. In contrast, in the corporate, commercial, and industrial markets, leasing cycles are longer. This is due to several factors:
- Commercial properties are usually delivered in a gray state, which represents an advantage for the developer, but implies a high adaptation cost for the tenant or buyer.
- Companies only formalize contracts when the property is ready to operate or is close to delivery. In the commercial sector, if the property is very popular, reservations can be made earlier.
- If the buyer is an investor who builds, develops and acquires for rental purposes, they must assume that the placement of the rental does not begin immediately after delivery, although the marketing process does begin from the construction stage.
This completely changes the cash flow equation. Although the price per square meter may be higher than in residential properties, the payback periods are different.
3. Overestimating the ability to pre-place before delivery
Securing firm lease agreements during the construction phase is challenging, especially for retail spaces or large corporate offices. In the case of industrial spaces, it's possible, provided they are built to suit the client's needs. Many companies, due to internal policies, cannot commit until the space is completed. Furthermore, deposit amounts are often substantial, and not all tenants are willing to tie up capital for 12 or 24 months.
4. Not considering the profile and real needs of the buyer or user
Today, the Dominican market is made up of different types of investors:
- Institutional funds (AFIs, trusts, public or private funds)
- Business or family wealth groups
- Individual or corporate investors who buy to rent or use
In all cases, it is key to design with profitability, functionality, and adaptability in mind. Architecture should facilitate occupancy, not hinder it.
5. Ignoring the impact of market adjustments and new expectations
In the residential sector, properties are delivered move-in ready. In the commercial, corporate, and industrial sectors, delivery in shell condition is the norm. But this is starting to change.
Increasingly, tenants, especially medium and large companies, are requesting that landlords make certain improvements or adjustments before moving in. This brings two fundamental concepts into play that developers need to understand:
- Tenant Allowance: The landlord assumes the cost of certain improvements (floors, ceilings, lighting, air conditioning, etc.) and recovers it as part of the rent over the term of the lease. It is, essentially, a type of built-in financing.
- Tenant Improvement: This refers to improvements made to adapt the space to the tenant, but which remain as added value to the asset. The tenant may not pay for these improvements directly, but may accept a higher rent or a longer lease.
Both schemes have financial implications and should be considered when projecting returns.
6. Not understanding the difference between "gray work", "plug & play" and "turnkey"
A good location is no longer enough. Today's tenants are looking for comprehensive solutions. That's why it's also important to distinguish between these terms:
- Shell space: Unfinished space. Lower initial investment for the developer and owner, but more difficult to rent quickly.
- Plug & Play: Semi-furnished spaces with air conditioning, flooring, lighting, and basic partitions. Tenants can move in quickly with minimal adjustments.
- Turnkey: The owner delivers the space fully finished and ready to operate, according to the tenant's specifications.
This latter model typically requires long-term contracts, as the owner needs time to recoup the additional investment. However, it also significantly increases placement opportunities, especially with corporate users.
7. Underestimating the importance of anticipatory business strategy
Developing a project without a clear marketing strategy from the outset is another common mistake. Many developers only begin promoting it once the project is finished, when ideally, they should involve architects and brokers from the very beginning of the project. This allows them to validate the product, attract potential anchor tenants, and enter the market with a competitive advantage from day one.
Conclusion:
The commercial, corporate, and industrial market presents a significant opportunity for investors and developers. However, it is not a replica of the residential market. It operates according to its own logic regarding timelines, costs, negotiation, and placement.
The price per square meter may be higher, but occupancy may take longer. Delivery in shell condition may be cheaper, but the market increasingly demands more upgrades. And while some tenants are willing to pay for improvements, many expect the landlord to cover or finance them.
Understanding this dynamic—and planning accordingly—is key to achieving profitable, sustainable assets that are truly aligned with market demands. As an investor, you must make informed decisions, anticipate realistic scenarios, and avoid mistakes that can be prevented with a strategy
The opinions expressed in this article are the sole responsibility of the author.
