Late last year, my friend Chris called me to ask whether he should withdraw all of his deposits from his local bank. Chris was afraid that his bank might fail and he'd lose his savings. "This isn't 1929," I said. "Your deposits are insured and the government's taking action to shore up our lending institutions to protect your deposits and to keep our banks solvent." Read more
5 years of national office leasing data suggest that Energy Star Certified properties are leasing for significantly higher rents. In 2004, national office rates for non-Energy Star properties was $24/SF. Energy Star Certified Properties were leasing for $2/SF more than their peers. On a 100,000 SF building, that differential on a 8.5 CAP rate equates to roughly $2.3M in equity.
2009 data are even more compelling. That same Energy Star Certified 100,000 SF building is leasing for $4.75/SF more than its peer today. That differential on a 8.5 CAP rate equates to roughly $5.9M.
Here's the good news: a preliminary Energy Star study costs about $3,000.
So long as demand for these properties outstrips supply, these trends should continue. They won't, however, last forever as more investors catch on to this new information.
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.
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PPR expects property values across all sectors to continue falling through at least 2010. Multifamily will lead the decline, registering a 32 percent drop between 2007 and 2010. Office will fall 31 percent during the period, retail 29 percent and industrial 21 percent. Click Here.The early stages of this correction began in early 2007 as speculative investment continued while the tenant market began to show early signs of softening. One fundamental was at work in our market area and among our clients: landlords cutting deals with tenants that were 20% below actual values. These deals were under the radar but represented a monumental shift in values, or phase 1 of the downturn. Imagine a landlord with a 20,000 SF building who was charging $10/SF NNN for his space. He was generating $200,000 in net operating income. On a 7 CAP he's worth $2,500,000. He then signs a new deal at $8/SF NNN, or 80% of his previous rent. His building, priced on the 7 CAP, is now generating a $160,000 net operating income and is worth $2,285,000, or 9% less than before. Phase 2 kicks in. CAP rates go up. Investors now say they'll pay a 9 CAP for that deal. Now his building is worth $1,777,000 or 29% less than before. Voila. That's what PPR has projected. Phase 3 is yet to come. When that investor's debt matures at the 5 year mark, he needs to go back to the bank and refinance his loan. Guess what, now he's worth 29% less than before and the bank wants him to contribute more equity to decrease his loan to value ratio. If he doesn't have the cash, partner(s), or credit, his building's up for sale or goes back to the bank. That's where the last hit in values will come from. And who really knows how big that's going to be when it happens. Get Your FREE 2009 Commercial Real Estate Market Outlook for the Boston Area. [download id="4"] Your Free Copy 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.
You're watching a football game on television. One team kicks off and a flurry of activity ensues. Guys are running everywhere and the ball's on the move. They settle down. The two teams square off. They run plays to outsmart and out-maneuver the opponent. The offense works its way down the field, reaching the 50 yard line, the 40, the 30, then the 10, and they land on the 5. The game's moving quickly, when at the 5 yard line, first down, and they can't budge. Huh? They've made it all this way and now they're stuck and have just run through 4 downs with 5 yards left to go.
How many deals have you seen end this way?
In 2009, it will take 20% of the effort to get to the 5 yard line and 80% of the effort to reach the end zone. Most people have it the other way around.
Here's why. Both parties have exhausted their emotional capital getting there. Emotional capital is the sense of good will and mutually advantageous perspectives that two parties share when negotiating a business transaction. Its outcome is known by the cliche, win-win. Two parties that use emotional capital sparingly through a tough market, often reach agreements they consider a success because both parties would willingly negotiate with one another again. It's when you've used 20% of your effort to get to the 5 yard line and 80% to reach the end zone, score a touch down, and the game continues.
Sound obvious?
I'm an expert in negotiations and I'll confess that I sometimes forget these things when I'm representing myself. It's easy to get emotional through a negotiation, take things personally, and to avoid, accommodate or attack the other party without respecting what you and the other party really wants. And it's really easy to exhaust emotional capital trying to reach an agreement, just to watch it die because no more willingness to give.
Stop yourself. Step back. Use emotional capital to create a winning, positive, and productive negotiation. It's free and often ignored. You'll often find the other party making concessions you'd never have believed possible, and usually, you'll uncover solutions to problems that were invisible to you while you were upset about the other party's response.
The outcome? You've invested your emotional capital wisely and you do more deals together in the future. And most importantly, your deals are easier because you share something in common with your new friend, trust.
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.
