Greater Boston Commercial Real Estate Market Insights & Trends for Owners

TLDR: Don’t trust 30-second valuations. Know that valuations should be balanced by multiple perspectives.

To speak to one of our market experts so you can get clarity on your questions, request your consultation here → https://masscommercialproperties.com/commercial-property-valuations

Have you ever wondered why you see a building listed for sale, but it never trades? It’s highly likely they received a valuation that did not take into consideration market factors or multiple valuation approaches.

To speak to one of our market experts so you can get clarity on your questions, request your consultation here → https://masscommercialproperties.com/commercial-property-valuations

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If you’re facing a big commercial real estate decision and want to know where you are in the market, watch this video. I share two things that you should never ignore when deciding to hold, buy, sell, or refinance a commercial property.

To speak to one of our market experts so you can get clarity on your questions, request your consultation here → https://masscommercialproperties.com/

Wondering how the commercial real estate market’s performing?

In this video, you’ll get the latest 2023 commercial real estate sales data explained for the office, retail, and industrial markets surrounding Greater Boston.

You’ll also uncover where the market’s expected to go in 2024 and why the average price per square foot for office, retail and industrial sales only tell half the story of what’s really happening.

In this insightful video, we delve into the rapid fluctuations in lending rates and their profound effects on commercial property values. With lending rates on the move, we explore how banks are assessing deals, pricing risks, and determining valuations in today’s market.

Join us as we walk you through a powerful spreadsheet tool utilized by our company to create valuations using both the income approach and sales comparison approach. Discover the methodology appraisers employ to develop the cap rate, allowing us to assess the market’s cap rate adjustments in response to changing interest rates and bank practices.

We start by examining recent developments in the lending market, with Jay Powell’s testimony before Congress and the recent 25 basis points increase in the Fed funds rate, taking it to 5.5%. The projection is towards a 5.75% rate, which directly impacts commercial property pricing and loan evaluations.

During a conversation with a lender, we analyze a 40,000 square foot industrial building generating $15 per square foot base rent ($600,000 annually) with capital reserves included. By considering a 25-year amortization and building in the lender’s risk margin on the borrowed funds, we witness how the interest rate impacts the cap rate and overall valuation.

As banks have grown cautious due to the rate run and increasing market risks, they are marking up interest rates by up to 3%, influencing cap rates even further. We explore how this directly affects cash-on-cash return requirements for investors and how valuations are adjusted accordingly.

To better comprehend the impact of these changes on property values and market expectations, we compare valuations from different interest rate environments, highlighting the emergence of a bid-ask gap.

Finally, we emphasize the importance of being proactive in determining property valuations and positioning in this ever-changing market. If you want expert guidance in evaluating your property’s worth and finding the right buyer at the right price, visit our website at mansardcre.com and request a consultation with our experienced team. Subscribe to our channel for more market insights and updates on commercial real estate. Stay informed and stay ahead in today’s dynamic real estate landscape.

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Have you ever wondered how commercial real estate brokers determine the value of commercial properties? In this informative video, Jeremy Cyrier, CCIM shares insights into the valuation process and what you should know when working with a broker.

Whether you’re a seller or a buyer, understanding the various types of values involved, such as the seller’s value, buyer’s value, and market value, is crucial. Jeremy explains how brokers consider appraisals, lender’s values, tax assessor’s values, and other factors to arrive at a comprehensive valuation. He emphasizes the importance of selecting a broker who demonstrates a methodology and proven process to determine market value accurately. By following this approach, you can make informed decisions regarding pricing and marketing your property.

If you’re interested in getting an evaluation for your commercial real estate, visit mansardce.com and request a consultation with the expert at Mansard. Subscribe to the channel for more valuable videos on commercial real estate, market updates, and insights.

Values Mentioned in Video:
Seller’s Value
Buyer’s Value
Market Value
Appraiser’s Value
Lender’s Value
Assessor’s Value
Broker’s Value

Links Mentioned in Video:
Why buyers underprice commercial real estate: https://www.youtube.com/watch?v=Kf3G_5cn7cY

How to Choose the Right Commercial Property Sales Comps: https://www.youtube.com/watch?v=HvpYgF0cnMA

How to Calculate Commercial Real Estate Value (My Cap Rate Trick): https://www.youtube.com/watch?v=fu9FtAfQfd4

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6 Reasons Why People Are Selling in Today’s Market: https://masscommercialproperties.com/…

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In this video, Jeremy Cyrier, CCIM President and Commercial Real Estate expert dives into the potential impact of increasing interest rates on commercial real estate values. With recent news of Jerome Powell’s plans to raise interest rates again in 2023, many are curious about the consequences for the market.

Starting with the inflation rate, which currently stands at 4% year over year, it has fallen but not enough to satisfy the Federal Reserve. Instead of stabilizing rates, they are signaling that we can expect further increases throughout the year.

So how does this affect commercial real estate? Well, as lending rates rise, the cost of borrowing capital for investing in commercial properties becomes more expensive. Consequently, investors or buyers have to pay less for properties to achieve desired returns that align with risk-adjusted financial goals.

A recent senior loan officer survey conducted in April 2023 highlighted that banks are tightening credit for commercial real estate lending. They are lowering loan-to-value requirements and increasing spreads over the cost of borrowed funds. This means that borrowers will face more stringent criteria and higher interest rates.
For example, in a normal market environment, a bank in the Boston area might borrow money from the Federal Home Loan Bank at 4.2% and add a markup of 1.6% to 2.2% to arrive at a competitive lending rate. However, due to the changing lending landscape, banks now request lower loan-to-value ratios and are quoting interest rates in the range of 8% to 10%.
Consequently, illiquidity is expected to enter the market, leading to a slowdown in transaction velocity throughout 2023. Obtaining borrowed funds will become more challenging, causing sales to take longer and introducing lag and drag to the market. However, buyers with access to cash and capital will have opportunities to capitalize on these market conditions.

If you are planning to sell your commercial property, it is crucial to include current lending assumptions in your underwriting. The lending environment is evolving rapidly, and relying on past lending assumptions can lead to unrealistic expectations. Additionally, it’s important to find buyers with preexisting banking relationships, as many banks now prioritize borrowers they have already worked with.
Stay informed about the rapidly changing landscape of the commercial real estate market. If you have any questions or would like to request a consultation, visit our website at mansardcre.com. Simply click on the “Request Consultation” button in the top right corner to contact us. Our experts will be happy to address your concerns and provide the information you need to make informed commercial real estate decisions.

Video Links:
https://www.federalreserve.gov/data/sloos/sloos-202304.htm

https://www.fhlbboston.com/fhlbank-boston/rates#/long-term

https://www.federalreserve.gov/newsevents/testimony/powell20230621a.htm

https://www.nytimes.com/2023/06/21/business/economy/powell-inflation-federal-reserve.html

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Join Jeremy Cyrier from MANSARD as he sits down with 1031 exchange expert Patty Flowers to discuss how to use 1031 exchanges to purchase your retirement property. Jeremy introduces Patty as his go-to expert for all things related to 1031 exchanges and explains that they wanted to address a common question they receive: how to retire from real estate investments without paying hefty taxes.

Patty explains that a 1031 exchange is an estate planning tool that allows investors to defer up to 100% of taxes when selling a property. The goal is to reinvest the proceeds into equal or greater value properties. She discusses various scenarios where investors might buy single tenant triple net lease properties for income and also consider purchasing a primary residence for retirement using a 1031 exchange.

The conversation delves into the specific requirements and regulations surrounding the use of a 1031 exchange for setting up a primary residence. Patty explains that a residential rental property can qualify as a like-kind exchange, but it must be rented for at least two calendar years. She details the IRS regulations regarding personal use and rental periods during the first two years of ownership.

Jeremy and Patty discuss the transition from investment use to personal use, commonly known as converting the property. They clarify that no taxable event occurs when converting the property into a primary residence. However, they note that reporting changes are required, such as the cessation of rental income and depreciation on tax returns.
Furthermore, Patty highlights the proration of the primary residence exemption when selling a property that was previously a 1031 exchange. The IRS regulations dictate that the exclusion will be prorated based on the total period of ownership and the time spent renting versus personal use.

The video also explores the option of reinvesting the property back into the rental market after living in it as a primary residence, allowing for potential future exchanges. Jeremy and Patty touch on the importance of estate planning and the stepped-up basis benefit, which can eliminate capital gains tax liability for heirs when the property is passed down upon the owner’s death.

Timestamps:
00:05 – Introduction
01:06 – Exploring the 1031 exchange for retirement planning
02:45 – Requirements for 1031 exchanges and mixing property types
04:42 – Regulations for using a 1031 exchange to set up a primary residence
06:35 – Converting the property to a primary residence and tax implications
08:26 – Proration of the primary residence exemption and taxable gains
09:47 – Using a 1031 exchange to save on taxes and the stepped-up basis benefit
11:59 – Exploring the estate planning benefits of a 1031 exchange
13:37 – Conclusion and contact information

Patricia A. Flowers, CES®
Vice President
Toll-Free: (877) 781-1031
Cell: (617) 899-4718
Direct: (617) 423-1031
Toll-Free Fax: (888) 310-1868
Email: patricia.flowers@ipx1031.com
https://www.ipx1031.com/locations/name/patricia-flowers/

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In this video, Jeremy Cyrier from MANSARD discusses the challenges and recommendations when dealing with commercial real estate decisions within a family. Drawing from his own experiences, Jeremy provides valuable insights and practical advice for families looking to sell or buy commercial real estate properties. He emphasizes the importance of being well-organized and having clear communication among family members to ensure a smooth decision-making process. Jeremy also addresses the emotional aspects associated with selling a property that holds sentimental value, highlighting the need for family members to prepare for the range of emotions that may arise during the transaction. Additionally, he stresses the significance of having a skilled attorney well-versed in estate, probate, and trust matters to ensure all necessary paperwork is in order before entering the market. With over a thousand commercial real estate transactions under his belt, Jeremy’s expertise shines through as he provides valuable tips for families navigating this complex process.

To learn more about MANSARD and how they can assist with your family’s commercial real estate decisions, visit our website at mansardcre.com and click on the “Request a consultation” button in the top right corner of the page. Subscribe to our channel for more informative videos and stay updated on the commercial real estate industry, specifically in the greater Boston area.

Contact our office directly at 617-674-2043 for immediate assistance. Don’t miss out on the opportunity to make informed decisions and ensure a successful transaction for your family. Like this video and share it with others who may benefit from Jeremy’s expertise.

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6 Reasons Why People Are Selling in Today’s Market: https://masscommercialproperties.com/…
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