Racing for Daylight

This is the time of year where you need to make a drop dead decision ASAP, if you plan to close this year.  Although there are only four weeks left as of this writing, it's amazing how much faster something can happen if everyone gets on board to do so early.  Bankers, for instance, often have bonus plans that would give them that extra boost to push a transaction over the finish line.  Realtors certainly do. Owners, of course, have tax consequences that would favor closing in one year over another.

If you think it's too late, it's still worth checking.  People travel less before the holidays, at least for business, so those who are around may be more reachable and available.  It's just true that, when you put a rush on any order, everyone moves it to the top of the list.  So don't despair if you have left a sale for too late--just act quickly!

Never Too Soon to Think about Taxes

We are clearly in the dog days of summer, and many people are just sitting by pools, beaches, or air conditioners, but fall is just around the corner.  And what comes after fall?  The end of the year, and always faster than we think it will arrive.

If  you are a buyer or seller of commercial real estate, it makes sense to start end-of-year tax planning now. We don't know everything yet about the new tax act, but we know some things, and we know provisions that haven't changed.  In addition, any change in your circumstances, life choices, or tax status can cause you to need to plan for the future with an eye toward minimizing tax consequences.

One of the cardinal rules of transferring real estate is that it almost always takes longer than you think it will.  Hence, my mid-summer plea to think ahead.  Why rush in December, when you can get a jump on the end of the year by starting now?  Even if you want your property to go onto the broader market after Labor Day, the process of getting things set to list, taking good pictures, filling out forms, and tracking down signatures can be lengthy.  Vacations and back to school duties can also cause slowdowns.

Don't miss the fall bump in the market by beginning too late.  Call us today to take advantage of the time left before everyone packs up their picnic baskets and heads back to work!

Difficult Searches

When our Commercial Department meets for sales meetings, the busiest part of the agenda is the part we call Needs. That's where agents bring up the buyers and tenants they have, and specify what those people are seeking. Often, the room goes quiet, because nobody knows of anything that fits the desired parameters.  Every once in a while, someone raises a particularly difficult request, but most of the time the answer is just that the market is short of listings in that sector, whatever it is.  And there are a lot of sectors without enough product.  Such is our current commercial situation in Connecticut.

It's interesting to be in a market where sellers complain that prices are low and selling times are long, yet buyers and tenants both say that there's nothing for them to buy or rent.  Some of that is a mismatch between what people want to sell/lease and what people want to rent/buy, but some is a true lack of inventory.  This blog post is an attempt to redress that.  If you have something to sell or lease, please don't be deterred by tales of woe you read.  Give us a call--we have buyers and tenants lined up for you!

New Haven Industrial Real Estate--No Supply, No Demand

Perhaps we have discovered a new dynamic in the real estate market panoply--no supply and no demand.  Or, they are more likely related in a pretty simple way.  Weak demand over the past number of years for industrial property in Connecticut has led to a lack of new construction in this sector.  Many companies have left for warmer (weather-wise and tax-wise) climates, leaving a new supply of older buildings in their wake.  Fewer companies than in other places are expanding into more industrial space, so there isn't much demand to take up the supply that exists.  Therefore, rates are low, even though people looking can't find what they want and need.

That sounds awful, but it represents an opportunity.  Buildings can be converted, or constructed, and profitably, since there are buyers and tenants out there that cannot find what they want.  Sellers and landlords can continue to accept low rates of return, or they can repurpose those buildings to different types of uses (residential or flex spaces).

There is little enough around so that what is here should move, and, arguably, prices should be rising.  In order to make that happen, new players may have to enter the arena, and up everyone's game.  Let's hope for all our sakes that this occurs.  In the meantime, we would advise potential sellers to be undeterred by low rental rates, since people are looking for what's not there, and anything new could be just the ticket for a thus far unsatisfied user.

New Haven Outperforming Other Connecticut Cities

Fairfield County, with its big corporations, is still reeling from the actual, but even more the psychological, effects of GE's move to Boston.  GE is still leaving a lot of employees in Fairfield, but both the home and office market reflect the strain.  Hartford, on the other hand, is losing Aetna after a century and a half, and other big insurance companies have moved, downsized, or merged as well.  In addition, the city itself is teetering on the brink of bankruptcy, which doesn't improve its chances to pick up new office users.

That leaves New Haven, with its startups, biotech related to Yale, and medical complex, to pick up the slack.  New Haven also has an easier time of recruiting young professionals, since there is a vibrant nightlife scene, and many residential choices, from close-in city neighborhoods to high-rise condos and apartments.  New Haven officials and developers are banking that this will continue, and the future is looking bright for that trajectory. 

Now, if only Connecticut could solve its fiscal problems, we'd be all set.  Come on, legislators, help us out here!

Appraisals

We are starting to see properties "not appraising out" lately.  That's an early indicator that prices may be increasing, at least in submarkets or areas where supply is limited.  What we mean by that term is that the appraisal number is lower than the amount on the sales contract.  If the buyer needs a mortgage, it's an issue, because he/she may not be able to borrow the full amount that they expected.  In other cases, where the buyer is paying cash, it is not uncommon for the buyer to put in a clause that the sales price cannot exceed the appraised value. 

There are two ways to look at this issue, as with so many things.  One is that the buyer should be willing to pay what a property is worth to him/her, regardless of the appraisal.  The other side of the coin is that the practical value of a property--what it would resell for, and what you could borrow against it--is dependent upon the appraisals.

Appraisals tend to lag the market, because an appraiser can only use comps from within a narrow range of closing dates, and within a very small area around the subject property.  It can be very hard sometimes to find good comps, and adjustments must be made from properties that might not be exactly the same in quality or type.  Since the comps come from recent sales, those prices could be lower, in an increasing market, than the sales prices on contracts that haven't yet closed. 

What advice do I have after all of this discussion?  Appraisal is as much an art as it is a science, and both buyers and sellers should be reasonably skeptical about exactitude.  Given the restrictions on bank lending these days, it is harder for a bank to take the same attitude, so just be prepared to make an independent decision in any given instance.