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Selling Your Commercial Real Estate in a Down Market

When do you know that selling commercial real estate in a down market is the right decision? Ask Sam Zell.  He says, "Everyday you're not selling, you're buying."  If he's right, then how do you make a decision about the right time to sell commercial real estate in a down market? Here are 4 points that answer that question:

1. Commercial real estate values are determined by how much you're willing to accept and what someone is willing to pay.  It's the intersection of these two opinions that is called a 'meeting of the minds' and that determines the value of your investment property at that point in time.  This is also known as fair market value.
2. Everyday that you choose to own your commercial real estate investment, you are agreeing to own it for its fair market value.
3. The investment property's value fluctuates from day to day.  Each day that you choose to own it, you agree that its value that day makes it worth owning and that you would buy it back for that price right now, whether it be higher or lower than the day before.
4. Once you decide that you would no longer pay the current price for your commercial real estate, you become an investment property seller.

Zell's statement boils down to your asking whether your capital works harder in your current commercial real estate investment or somewhere else.  If it's better invested in your commercial real estate, keep your property. Don't sell it. Commercial real estate values will come back. But, if you see other investment opportunities that provide you with a better return, i.e. look at Apple stock in February, 2009 at $68/Share, now trading for $214/share, or other acquisition opportunities where you increase your capital's velocity above its current performance, you may want to reconsider holding on.  If Zell's right, and I think his statement applies to both up and down markets, even flat ones, then everyday you hold that commercial real estate investment in a down market means that you're buying higher today and selling for less tomorrow. Consequently, the right time to consider selling your commercial real estate in a down market is when you know that your capital will work harder in an alternative investment and that you would not invest in your investment property today.  Your opportunity cost is too high to hold on and you're better served moving to another investment. If you're considering selling your commercial real estate today, email me at Jeremy@Mansardcre.com with the words "Selling my commercial real estate in today's market" in the subject line.  Include your name, when you would like to be called, and the best number to reach you. We will spend a few minutes discussing selling your commercial real estate and if there's a fit, you may invite me to further discuss your investment property's value.  If there isn't a fit, we'll tell you we cannot help and will refer you to another firm that may be a better match. Get free weekly email updates of this blog. About the Author: Jeremy Cyrier, CCIM is the founder/principal of MANSARD Commercial Properties and member of the CCIM Institute faculty. He delivers thoughtful, large scale commercial real estate solutions to the individual challenges owners and tenants face. Jeremy Cyrier, CCIM was elected by Banker & Tradesman as one of its New Leaders in 2009. You may reach Jeremy at Jeremy@Mansardcre.com.