Office Building Analysis

[Michael Willis]

Hi All, looking for some feedback on my potential first office building purchase. 

The Property: 

1) is 100% occupied with about 15 tenants (of all sorts) 

2) has a cap rate at about 8.0% at last ask. 

3) is 3 stories is in what I consider to be a good location 

4) has an elevator and 40+ parking spots is more than 15k sq ft but less than 20k sq ft. 

Background: 

5) a large vacancy (reportedly 2200 sq ft.) last year, (which is now filled) prompted seller to list property for sale but with no takers. 

6) since then seller has filled the space. 

7) seller has owned it for 10 yrs possibly buying at the height of the market. 

8) seller has made some exterior cosmetic and mechanical improvements in that time. 

Target price: 

9) no more than 2.5m w/a cap rate of 8.96% (less is better of course) 

10) 5 year leases in place with gross rent with with 3% annual increases, no cam included

Question:  (a) What if anything should I be mindful of in this purchase particular to an office building?

(b) At a cap rate of 8.0 or higher for an occupied office building in a good area, whats the downside may not be seeing? 

(c) General Feedback on investing in office vs residential pros and cons in this scenario? 

- keep in mind its almost impossible right now to find residential with caps above 6 in my area worth buying

Thanks to all!