Types of Commercial Real Estate Transactions That Benefit from Escrow

In simple terms, an escrow is a contractual arrangement in which a neutral third party, known as an escrow agent, receives and disburses funds for transacting parties. These funds are held until both parties are satisfied that the terms of the transaction, legal and contractual, have been met. 

An escrow agent serves as a neutral, third-party intermediary, ensuring that all documents, funds, and assets are secure and transactions remain impartial. 

This gives both buyers and sellers confidence that their interests are protected throughout the process.

Retail Property

Retail property transactions, such as those for shopping centers, are impacted by economic shifts and customer demand. Escrow mitigates risks by managing deposits, funds, and leases while coordinating with lenders and title agencies to streamline closings. Their expertise also ensures smooth document transfers and stakeholder coordination.

Digital Economy Properties

According to a recent global survey by Deloitte, real estate owners and investors placed digital economy assets, like data centers, as the second most promising sector for growth opportunities in 2025. 

With high investments and specific operational standards, transactions for digital economy properties carry unique financial and operational risks. 

Now is the best time to invest in escrow services for such real estate deals. Escrow services ensure that compliance and infrastructure requirements are met before funds are disbursed, protecting both investors and operators in these highly specialized deals.

Office Buildings and Commercial Spaces

This type of transaction in commercial real estate involves tenant improvements, leases, and multiple stakeholders. An escrow will hold funds for tenant build-outs and contractual obligations, giving peace of mind and security to both tenants and landlords as they negotiate terms and oversee space improvements.

Student Housing

Escrow can simplify student housing deals by ensuring that funds and asset transfers meet the required conditions before closing. It also helps manage risks tied to tenants and seasonal income, securing funds for upgrades and smooth ownership transitions.

Warehouses and Industrial Properties

For industrial properties like warehouses or distribution centers, an escrow keeps things secure when high-value equipment or special facility needs are involved. Funds can be kept in an escrow and released only after inspections are completed and all assets are delivered. This protects buyers from last-minute problems and risks arising in the deal.

The main purpose of escrow is to build trust and security between buyers and sellers in commercial property deals. 

These high-stakes transactions carry significant risks, so escrow gives both parties confidence that the deal will go smoothly and as expected.

Safeguarding Funds and Key Documents

The buyer usually deposits earnest money into the escrow account at the start of the project and adds the remaining funds before closing. Then, both parties submit signed documents to the escrow agent for safekeeping and verifications. 

Once all requirements are met, the agent files necessary documentation, releases funds, and distributes paperwork to all parties involved.

Preparation of Documents and Verification

Agents from escrow companies make sure that all necessary documents—loan papers, purchase agreements, tax forms, and deeds are correctly drafted and signed. This can come as a huge relief during complex real estate transactions as they collect and verify documents from all parties closing, ensuring compliance with local tax regulations and legal requirements.

Calculating Costs

In commercial real estate transactions, costs like rent, taxes, and utilities need to be prorated based on ownership periods. Escrow agents calculate these prorations along with additional closing costs and prepare a settlement statement to ensure both parties pay their fair share and all costs are covered.

Finalizing the Transaction

Once all conditions are met, the buyer and seller instruct the escrow agent to close the deal. As final steps, the agent releases funds as per the settlement agreement, paying off taxes, vendors, closing costs, and lenders. The agent also records the deed and sends final, executed documents to both parties.

Optimism is growing in commercial real estate for 2025. 

After two years of anticipating revenue declines, investors and property owners are now overwhelmingly positive, expecting revenue growth to return in 2025. This is the right time for you to look for escrow services.

Since 1976, Arizona Escrow & Financial (AEF) has been Arizona’s trusted name in escrow. 

Ready to streamline your next commercial property transaction? Connect with us to learn how we can help.