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!
Showing posts with label lease. Show all posts
Showing posts with label lease. Show all posts
Monday, June 25, 2018
Thursday, June 25, 2015
The Puzzle of Tenant Representation
Some people may wonder why they need a real estate agent to represent them, if there is a sign in front of the building, and space for rent? One big reason is to help with negotiating the lease. Leases vary tremendously from property to property, owner to owner, and landlord to landlord. They can be very confusing. Sometimes it is even difficult to tell what the actual rental amount is. Net leases can be called gross leases with "extra rent", expenses for the common areas can be handled very differently from space to space, and expansions, renewals, rights of first refusal, and other options can seem baffling to people who have not done this before, or not done it often. We even had one client whose lawyer would say "They can agree to this clause now, or I'll hide it somewhere in the lease and get it anyway". That's what your agent is for--to guide you through all the twists and turns, and give you guidance as to custom and prevailing rates in your area. As a reminder for those who may not know, the commission for the buyer's agent is most often paid by the landlord under the terms of the lease: although that can certainly vary, it is common for the tenant not to pay for his/her representative. As a further reminder, the commission is determined by the lease, which is between the landlord and the listing broker; the tenant has nothing to say about it. That's why it is sometimes surprising to hear that tenants (and buyers) believe that they will pay less if they don't use their own broker. Usually, it just means more for the listing broker, who is then handling both sides of the transaction. There are many peculiar things about our industry, and they aren't all in our favor. Most times it really pays to have a tenant representative, or a designated agent within the brokerage firm, advising you, as a tenant, on terms and conditions, as well as on rental rates.
Tuesday, November 4, 2014
Cap Rates Falling
Investment properties in most markets are increasing in value. One good measurement of this is the cap rate, which is a proxy for the riskiness of the project--the lower the cap rate, the higher the price that an investor will pay. In four of five major categories measured for commercial and investment properties, cap rates declined from 2013 to 2014.
Why is this happening? There seems to be a surge in the market of 1031 exchange buyers; i.e., people who are trading one investment property for another, in order to defer taxes. The rules are very strict, and there is currently more demand than available product, which pushes up asking prices. That, in turn, causes cap rate to decline. Other factors that affect cap rates are lease length, tenant credit worthiness, and interest rates for long term money. If you are planning to buy, you'd better start looking now!
Why is this happening? There seems to be a surge in the market of 1031 exchange buyers; i.e., people who are trading one investment property for another, in order to defer taxes. The rules are very strict, and there is currently more demand than available product, which pushes up asking prices. That, in turn, causes cap rate to decline. Other factors that affect cap rates are lease length, tenant credit worthiness, and interest rates for long term money. If you are planning to buy, you'd better start looking now!
Friday, March 8, 2013
A Snow Day Report
I just returned from our national network conference, Leading Real Estate Companies of the World. We comprise the greatest share of real estate sales in our association of excellent independent companies, exceeding all franchises. Although the focus of the conference was mostly on residential, a few things were clear in the commercial arena.
First of all, we are all using less space. I sat next to the manager of a huge company, who told me that they saved 40% of every rent dollar over the past couple of years. Every time they had a lease come up for renewal, or they had a chance to renegotiate, they paid 60% of what they were paying before. Sometimes that meant that they took 60% of the former square footage; sometimes it meant that they just paid 40% less for the same space. And we aren't the only industry seeing those trends. Everyone (except, apparently, Yahoo) will be using less office space per employee in the future.
We also saw that money was being made through cutting costs, more than from increasing profits. Margins in our industry are notoriously low, but most of us had very good years. Most of the people I asked said that they made more than half of their bottom line from saving money, with the balance from an improving market. Again, we are not alone in this statistic, either.
Finally, it was obvious that Connecticut is lagging in this recovery. Other markets have switched over to being sellers' markets, with homes getting as many as 50 offers, due to lack of supply. We haven't seen that yet--our averages across the board are closer to a year. That puts us in a very different selling climate in residential, and it tells you that we don't have the jobs here to stimulate housing demand. We certainly can predict, however, that it will improve here, especially as workers transferred in sell their houses elsewhere, often for high prices. Good things come to those who wait.
First of all, we are all using less space. I sat next to the manager of a huge company, who told me that they saved 40% of every rent dollar over the past couple of years. Every time they had a lease come up for renewal, or they had a chance to renegotiate, they paid 60% of what they were paying before. Sometimes that meant that they took 60% of the former square footage; sometimes it meant that they just paid 40% less for the same space. And we aren't the only industry seeing those trends. Everyone (except, apparently, Yahoo) will be using less office space per employee in the future.
We also saw that money was being made through cutting costs, more than from increasing profits. Margins in our industry are notoriously low, but most of us had very good years. Most of the people I asked said that they made more than half of their bottom line from saving money, with the balance from an improving market. Again, we are not alone in this statistic, either.
Finally, it was obvious that Connecticut is lagging in this recovery. Other markets have switched over to being sellers' markets, with homes getting as many as 50 offers, due to lack of supply. We haven't seen that yet--our averages across the board are closer to a year. That puts us in a very different selling climate in residential, and it tells you that we don't have the jobs here to stimulate housing demand. We certainly can predict, however, that it will improve here, especially as workers transferred in sell their houses elsewhere, often for high prices. Good things come to those who wait.
Thursday, June 7, 2012
More Good News about Commercial Real Estate Activity
We just looked at our booked sales through May and compared them to last year's numbers. We are 325% over last year at this time! Even taking out our biggest sale leaves us way up from 2011. It's unusual for commercial sales to rebound with or before residential, but that does seem to be happening.
There will still be time to buy or lease before prices really start to rise, but that time is clearly coming, since very little was added in the way of new space in the past decade. So, if you have space needs, fill them now, or don't complain when you can't do it, or do it at the same price, next year!
There will still be time to buy or lease before prices really start to rise, but that time is clearly coming, since very little was added in the way of new space in the past decade. So, if you have space needs, fill them now, or don't complain when you can't do it, or do it at the same price, next year!
Thursday, October 6, 2011
First Entry
Welcome to the new and improved Pearce Commercial Real Estate Website, and to my commercial blog. While I have been blogging for a long time, this is my initial foray into exclusively commercial material.
It's always an interesting feeling to be writing in cyberspace. You have no idea who, if anyone, is reading what you post. Nor do you know, unless they contact you, what they think of what you say. That's my way of saying that I'm going to write about whatever occurs to me that I think might be useful or relevant to the potential audience, and I would be delighted to get feedback from reader about potential future topics.
By way of introduction, Pearce Commercial Real Estate covers most of Connecticut, largely excluding Litchfield and Fairfield Counties. We do sales, leasebacks, leases, exchanges, and buyer brokerage for industrial, office, retail, and investment property. We also have a large residential department, and joint ventures in appraisal services, insurance and mortgages. We see the market from the "boots on the ground" level, and get enough industry material to also get the view from 10,000 feet above the ground. I will try my best to balance those two perspectives, and hope that you will find this site useful.
It's always an interesting feeling to be writing in cyberspace. You have no idea who, if anyone, is reading what you post. Nor do you know, unless they contact you, what they think of what you say. That's my way of saying that I'm going to write about whatever occurs to me that I think might be useful or relevant to the potential audience, and I would be delighted to get feedback from reader about potential future topics.
By way of introduction, Pearce Commercial Real Estate covers most of Connecticut, largely excluding Litchfield and Fairfield Counties. We do sales, leasebacks, leases, exchanges, and buyer brokerage for industrial, office, retail, and investment property. We also have a large residential department, and joint ventures in appraisal services, insurance and mortgages. We see the market from the "boots on the ground" level, and get enough industry material to also get the view from 10,000 feet above the ground. I will try my best to balance those two perspectives, and hope that you will find this site useful.
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