Selling

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How to End, Endless Negotiations - Boston Commercial Real Estate

Time kills all deals, right? Yes, but to make deals happen, you must avoid time's accomplice, the do loop.  We enter do loop unaware and full of good intentions, but what we have is an endless negotiation or circle of discussions that accomplishes nothing except to make us feel as though we're accomplishing something. Read more

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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? Read more

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How New England Based Investors See the Market

Change is inevitable and everybody resists it.  But what happens when the market changes and not everyone agrees with what's happening?  We wanted to find out.  So we ran a survey of over 1,157 New England based commercial real estate owners and investors to collect their thoughts on the commercial real estate market. Do you really think anyone selling today is distressed? Well, not exactly.  On our end of the business, we're hearing that there aren't enough opportunities in the market and that sellers are afraid to transact, creating the impression that those selling today must be distressed. Our survey indicates otherwise.  The results were almost equally divided.   Almost half disagreed.  Only 9% said they definitely agreed that anyone selling today is a distressed seller. What's going on with cap rates? Will they stay the same or increase?

We've seen an uptick in cap rates.   What do you think?  75% said  they believed that cap rates would change.  Yet a full 25% maintained that cap rates would stay the same.  So if rates are changing and most agree, are they going up or down?

According to our investors and owners, 84% thought they would go up, but they were mixed on how strongly they felt about it.  28% somewhat agreed that cap rates would increase, 44% agreed they would increase, and only 13% said that cap rates would definitely increase. When the market's in flux, people tend to withdraw and then slowly return as they reassess the situation. These opinions may reflect the beginning of a detente in expectations between buyers and sellers.  There's not doubt that cap rates are increasing and it seems to be gaining general acceptance in the market among owners and investors alike, which signifies the early steps in agreeing on the market's direction (the amount of the cap rate increase is to be determined by how much they buy and sell for over the coming months.) If you were to have asked these questions 3 months ago, the outcomes may have differed.  More people would have likely answered that anyone selling was truly distressed, which, according to this survey, seems to have moderated. Two types of sellers--necessity vs choice sellers--will emerge and investors will begin to see the distinctions between these opportunities.  They'll react accordingly, looking first for those who have to sell (necessity) and often times ending up buying from those who (choice) want to sell--these deals are often stabilized, less risky, are well located, and are superior in construction. We believe that this easing of expectations in the market will lead to increases in transaction volume. More properties will sell, but for less. In the next post, learn about what these investors and owners think of the tenant market and when they expect to see the bottom. About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and tenants. You may reach Jeremy at Jeremy@Mansardcre.com. Sign up for free CREFrontline updates, if you haven’t already. It's free and has absolutely no obligations.

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Why Being Pound Wise and Not Penny Foolish May Pay Off

Property owners, here's your good news, the stalemate is ending.  You have just summitted a mountain of transactions and have been sliding down the other side,  as represented in CoStar's chart showing national sales volumes for office properties. You're wondering, what's selling? And for how much?

The appraisers are wondering, too. "There just aren't any comps out there," as stated by 3 appraisers that have called our office in the past 3 weeks.  "We're calling around trying to value a subject property and are having a tough time finding lease and sale comparables to determine market value." Typically, the national office market measures approximately $2 to $3 billion in sales, which from 2004-2007 looked like an aberration when it reached a high totaling $18 billion. And in less than 2 quarters, we've quickly ridden down the other side and are looking for the bottom.  No wonder there aren't any comps. To those looking for comparables, the comparables are coming.  The market will be repriced and you'll have transactions to study.  The next question will be: what will those deals be worth? Our crystal ball says: watch for the second two quarters of 2009 to show more market activity than the previous two.   Speculators exit the market and investors reactivate.  Sellers, Buyers, and their Lenders battle over what market values really are, and by the end of the year, expect to see that chart beginning to point toward the mean. During the second half of the year, buyers creep into the market, testing the bottom to see which sellers are the first to accept that the game has changed. These sellers are labeled "distressed."    Some are.  Many aren't.  These pound wise sellers see that their properties are worth more now, leaving the impending battle over new values for the penny foolish sellers who enter the market needing to sell in 2010 (see more on this topic here), when we have more auctions, actual distressed sellers, and more supply that's competing for the same buyers. 2011 looks cloudy right now. There's talk of some employment growth, which helps to absorb excess space created by this year's job losses, but we believe this "return to the mean" may take some time to process.  If you're holding property  with an anticipated exit in the next 24-36 months, you may be pound wise to enter the market today instead of holding out for penny foolishness tomorrow. About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and tenants. You may reach Jeremy at Jeremy@Mansardcre.com. Sign up for free CREFrontline updates, if you haven’t already. It's free and has absolutely no obligations.