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It's a real understatement to say that the past few economic weeks have been tunultuous. Individuals will have differenc views of what took plce in Washington with regard to "resolving" the debt ceiling.
My wife and I raised four fine children. One of the things we always said was to "play nice with the other kids". Someone else's parants should have said the same to those in Washington who reportedly represent us. As a result of their actions, or inactions, and because of the our increasing debt, we saw a down grading of US debt on Friday.
So, what will happen next? Rather than offer my own views, let me offer those of Kevin Maggiacomo, President and CEO of Sperry Van Ness International, a major national commercial real state firm of which we're a member.
Take a look at Kevin's views. As he says, hes not a pollyanna; he's just looking at a balcned approach to where we are and where we're going.
http://www.maggiacomoblog.com/the-good-news
Article contributed by
Robert L. Yale, CCIM
Sperry Van Ness/ComVEst Realty
bobyale@svn.com
508-351-7079
Your Number One Choice for Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
When I opened my email a few minutes ago a headline struck me - fixed rate for multi family starting at 3.25 % Rates for other commercial property investments are similarly low. And this can include non-recourse as well as recourse.
Why is everybody waiting? Do potential investors feel that prices will go lower than they have? If they do, will interest rates start to go up? And if interest rates go up, will that difference eat up any presumed savings earned by waiting and maybe buying at a lower price?
For your information I've attached a flyer showing the rate structure currently offered through Sperry Van Ness- Better Capital, one of our partners. You may have your own lender that you like to work through. Suggestion? Contact them for their rates today and then let's see if we should talk about an investment opportunity.
The market is really a group of sub-markets with some areas growing and filling in nciely while other areas will take longer to return to full occupancy, When should you invest? What will be your best opportunity for future growth? There really is no cookie cutter answer to this question.
But call us today to see what's available for your approach. Whether you are looking for new orrice or industrial space for your own needs or would like an investment property - that'w what we do.
This article contributed by Robert Yale, CCIM
Sperry Van Ness/ComVest Realty
276 West Main Street
Northborough, MA 01532
508-351-7079
BOBYALE@SVN.COM | FAX 508-393-2336
Your Number One Choice for Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
The commercial real estate market (CRE) is in recovery. Everyone loves good news so
I'm starting with that. Now comes the big set of questions:
- How fast is it recovering?
- How far will it recover?
- What roadblocks stand in the way of a full recovery?
The chart shows where we were before the collapse, how far we fell and how we're doing today.
We had a reported 81% reduction in gross dollar volume of commercial real estate transactions from its peak in 2007 to its bottom in 2009. And there was an average price reduction (orange line) of 42% in that same time. The good news is that 2010 doubled the volume from 2009 and we're still progressing.
In our national economy, the CRE is a collection of hundreds, even thousands, of smaller markets. So, who has prospered and who has not? Major coastal cities such as New York, Washington, Boston, Los Angeles and San Franciso have all benefited through the sale of major trophy properties.
But secondary and tertiary markets have not necessarily shared in this growth. Major REITs and foreign capital have been attracted to quality in the A markets.
Not all markets have been neglected.It's been reported that over 50% of the freshly invested capital investments by REITs has been in projects less than $10 million. And while these investments haven't necessarily been in smaller markets, this cash infusion has freed up other capital from traditional lenders to invest in local projects.
What types of investments are attractive to this type of capital? Apartments are currently hot and probably will be for another five years. Office and industrial are in favor under the right set of circumstances. One example are owner occupied properties. Land development is still treated cautiously, not speculatively. Solid developers with a sound plan can get financed.
Here's a four letter word - JOBS.
- What's happening,
- when will the job market improve?
- Are businesses hiring? The last question is a big one, Businesses seem to be going low key on hiring trying to hold on to the efficiencies developed during the downturn while also taking a wait and see concerning the new health care cost system to be implemented later this year. The economy is improving, but without a substantial improvement in hiring. And until people feel more comfortable in that area they won't open their wallets and go on a spending spree.
What is your current experience with the financing market?
This article by
Robert L. Yale, CCIM
Sperry Van Ness/ComVest Realty
These charts and the background information have been contributed by Dr. Sam Chandon, Ph D, an economist at th Wharton School, chief economist for Real Capital Analytics and in practice at Chamdon Economics, 825 Third Avenue, 37th Floor, New York, NY 10022. We would welcome your comments concerning the article above and will be pleased to pass on your questions for further insight.
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Over the past couple of weeks I’ve seen a variety of experts’ opinions and statistics, all of which claim to be the last word on what’s happening in national, regional and local real estate markets. How do we make sense of them all?
One dire report claimed that home sales were off 20% compared to a year ago. What they didn’t emphasize strongly was the comparison to last year’s $8,000 first time home buyer’s tax credit. April was the last month of that program and artificially inflated sales of April 2010.
I tend to be a glass half full type, believing that we create our future based on what we believe. If we read and absorb the bad news we’ll act accordingly. If we collectively filter the news and respond positively we’ll act differently.
My own experience is that more people have “come out of the woodwork” recently interested in buying for their own use or as an investor. We now have more commercial properties under agreement in our own office than during the past three years and that seems to be echoed by other commercial real estate offices that I’m familiar with.
Even development land has seen increased interest as developers are positioning themselves to be ready for the next building wave.
Care to share your own thinking and experience? What do you hear from your friends and business acquaintances? Are you (or are they) feeling more optimistic about the commercial real estate market?
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The fact that the commercial real estate market took an historic nose dive in 2008 and 2009 is history. The pain was felt by almost anyone connected to this market whether that person was a property owner, a tenant, a banker - a broker. Now what we're all interested in is what will happen next. Are we in recovery? Is there a recovery around the corner?
Here's a glimpse of what has happened since the first quarter of 2005. This chart logs all commercial sales by quarter including office, industrial, retail, apartment, hotel and even development sites.
During the period from early 2005 through 3rd quarter 2006, sales were almost constant hovering just below $100 billion. The market overheated from the end of 2006 though all of 2007 Here's a question. Did we tend to assume that the super heated market had become the new norm? I can recall discussions with my peers in which we were hoping the market would cool off as we knew that this rapid escalation was unsustainable.
Be careful what you wish for!
Notice the sidebar comment on the graph pointing out that commercial real estate prices declined by an average of 42% during this period. And it was elsewhere reported that total sales volume in the industry declined by 81%!
2008 started slow and then fully collapsed into 2009 with the failure of Lehman Brothers in September 2008. I heard one economist say in early 2010 that "2009 was the worst year in commercial real estate history, and that 2010 would be twice as good" How good was his prediction?
Actually he was right on, especially as you look at the progressive pattern through the year. The fourth quarter showed good sales recovery. The reality is that this recovery wasn't evenly distributed throughout all markets. Peak sales tended to take place in the major coastal cities such as New York, Boston, Washington, DC and San Francisco with large trophy properties changing hands.
This chart also shows two shades of blue. The darker shade represents individual sales while the lighter shade is portfolio sales. What does the changing pattern mean to you and me? Simply that confidence is returning among large investors as money has begun to flow back into the market.
What happens when big money begins to flow back into the market? Demand increases, supply diminishes, prices increase. A big question is how lenders will respond to the small to medium sized investor. My sense is that financing is easier than it was a year ago, but that lenders are still cautious and underwriting is tougher.
When should the small, individual investor take advantage of the bargains out there now?
I'd like to hear your comments on any of the thoughts above. Examples: Are you considering investing now in commercial real estate? In discussions with friends and peers, what are their plans? If you’re a lender, or work closely with lenders, what is the mood now for lending on commercial real estate deals?
Author
Robert L. Yale, CCIM
Sperry Van Ness/ComVest Realty
276 Church Street
Northborough, MA 01532
508-351-7079
bobyale@svn.com
Your Number One Choice for Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Thanks to the cooling off of the hot real estate market of a few years ago, many homeowners and commercial property owners have found themselves unable to pay their mortgages on time resulting in the flood of foreclosures we all read about. Although most lenders have made a serious effort to work with their borrowers to find alternatives to a foreclosure, such as a “short sale” or a “loan workout”, there are still more foreclosures today than in recent memory.
This has resulted in a large volume of foreclosure auctions. Bidders at these auctions expect to get “a deal”, and they’re often times successful.
The other outcome of the foreclosure auction is that we tend to associate “auction” with a “foreclosure” – and that’s unfortunate.
Auctions have been used from early times to help create a market place in which a fair market value can be established through competitive bidding. Owners like this process since it can speed up the sales cycle to weeks rather than months and bring about a “time certain” for a closing.
In today’s world most auctions are the “open outcry” style in which an auctioneer presides from a podium allowing audience members to offer their bids by holding up their bid card or similar recognition. It’s fun, fast paced and productive.
But there’s another type of auction gaining popularity as well. This is the online auction conducted in a style similar to an eBay auction. In this style the broker produces marketing materials similar to their standard format and will make these documents available by email, in newspapers, web sites and social media. The marketing phase runs for some weeks letting all potential bidders become aware of the auction including the date of the auction, any deposits required, inspections and due diligence desired by the bidders as well as taking care of financing arrangements before the auction.
And then comes the auction date. Instead of a physical attendance, bidders participate through the internet in about a four hour period. When the last and highest bid is received and the winner is announced, the winner will be asked to sign a purchase agreement and make another deposit. After completing final due diligence the winner closes the transaction and becomes the new owner.
This type of auction is well suited to the non foreclosure auction and appeals to the type of owner described above – one who wants to establish fair market value within a certain time frame.
If you would like to see an example of such an auction, visit www.auctionsvn.com/30main . Sperry Van Ness/ComVest Realty is conducting such an auction in mid November on a landmark Northborough building.
To see a video of the property and enjoy the many features of this property, click Video.
For more information, contact Robert Yale, CCIM
Sperry Van Ness/ComVest Realty
http://www.auctionsvn.com/30main
508-351-7079
bobyale@svn.com
Your Number One Choice for Central Massachusetts Commercial Real Estate
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Let's think jobs as we talk about the commercial real estate market. This includes office, industrial and retail. Todays article will focus on the office market.
The office market affects us all in one way since it directly reflects the job market. As jobs increase, so does absorption of office space, and of course, the opposite works as well. As jobs grow, our economy follows pace. As jobs shrink, we find ourselves where we've been for a couple of years.
So, if the office market is a barometer of the job market, let's take a look at four Massachusetts sub makets and see hw we're faring.
Obviously, the Boston and Cambridge markets are the largest in Massachusetts and the most important economic engines. Both areas have signifcant Class A office buildings and attract the financial and bio tech markets respectively. These two sectors are important to the state's economic and income tax engines, so let's compare these two markets with the Boroughs (I-495/West) and the Worcester Metro markets and see how each is doing.
Thanks to the support of The CoStar Group, we're able to show you some exhibits drawn from their 2nd Quarter 2010 Office Report. What the reports show generally is that there have not been many new office buildings coming on line for the pst couple of years. Unless you're an office building developer, this is good news as it gives the current office inventory a better chance to play catch up with the market.
So, let's first glance at the Boston Market. This graph shows: 1) Deliveries of new space, 2) Absoprtion of all office space, 3) Vacancy rate. The Boston market has had two quarters of negative absorption averaging about 400,000 square feet per quarter. Vacancy rates have, on average, been rising since the 4th quarter of 2008 and now stand at about 9.3% (if you would like to see a little more detail, just click on the graph). Boston's average office rental rate has improved (decreased) by $2.00 since the first quarter to $33.00/SF.
Cambridge like Boston, has been seeing a generally increaseng vacancy trend and now stands at 11%, but here the average rental rate actually increased by $2.00/SF.
The Boroughs market has seen positive absorption for the last quarter with average rental rates driven down to about $18.00/SF from $19.75 in the first quarter of 2009. The graph suggests a tendency to stabilize in that area. Absorption was up and vacancy declined by a point to 11.5%.
The Worcester market has done the best in terms of absorption and reducing vacancy rate. It is now down to 8.4% and is on a decliining trend. There have been no new office projects on line for two years, and none forecast at the moment. This will continue to allow the current inventory to be absorbed. At the is time, rental rates have declined from $17.75 to $16.25. That doesn't encourage new construction in the short run.
We're all waiting to see the employment figures begin to grow more quickly. There have been positive signs in Massachusetts, even compared with the rest of the country, but not enough yet to fill our vacant spaces. Stay tuned for more on that subject.
And again, if you would like to see a little more detail about each market, just click on that chart.
This article was submitted by Robert Yale, CCIM
Sperry Van Ness/ComVest Realty
Bob can be reached at bobyale@svn.com, or
508-351-7079
Your Number One Choice for Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Sperry Van Ness has just introduced the next issue of THE ADVISOR, a magazine devoted to commercial real estate investors, owners and advisors. Watch a quick preview of what you can see and benefit from on this short video.
You and we know the commercial real estate market is in turnmoil. Perhaps The Advisor will help make sense of it.
Getting your copy of THE ADVISOR is easy. Just click here, download your copy, then sit back and enjoy individual articles that will help your investment strategy.
I'll welcome your comments about the magazine and also any questions you have where we might be able to help you. Call or email and we'll respond.
This article submitted by: Robert L. Yale, CCIM
Sperry Van Ness/ComVest Realty
bobyale@svn.com
Direct Line: 508-351-7079
Your Number One Choice for Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Wow! For anyone that enjoys riding a roller coaster, this is a fantastic ride. The news one day is up, the next day down. Unemployemnt drops below 10% to 9.7% and we hit a high. Then we read about foreclosures and we go into a dip. How do I get off this ride?
The best view I've heard is to look carefully, act carefully and follow good business sense.
We all know that prices rose too high a couple of years ago. Anyone with a sense of history could anticpate we'd have a correction. Now we're in that correction. Have we bottomed out yet seems to be the question.
Well, here's the problem. We'll never know when we've hit bottom until about two quarters beyond that time. By then, prices will have gone up again, rates will have increased and deals will become more scarce. So, the safe way is to follow the herd and wait until all the problems have been corrected.
How about another view?
Consider your goals, look for value in the current market and make a decision based on the current factors.
If you're a buyer you can see that many sellers have adjusted to the reality of the current market and adjusted their asking prices. If sales prices have been reduced, so have lease rates - important to the investor. Calculate your potential return in the current market factoring in an appropirate amount for vacancy. Try the calculation tool below as a sample to see how that investment you might be considering will work.
We'll be glad to help. Call me and I'll ask one of our prefessionals to get the information that will help you decide if today is the right time to make an investment. It just might be the best time.
This article submitted by Robert L. Yale, CCIM
Sperry Van Ness/ComVest Realty
bobyale@svn.com
508-351-7079
Your Number One Choice for Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Is Your Glass Half Full or Half Empty?
Whether you're currently active in buying, selling or operating commercial real estate, the chances are that it affects you in some way. Am I right?
Fortunately for those of us in the Central Massachusetts area, our market is slightly better than the nation as a whole. Part of this is due to our diverse business market which includes medical, financial, retail, manufacturing and the catch all "high tech". The most recent figures indicate our jobless rate dropped from 9.2% to 8.9% and - there are jobs being advertised. Employers are hiring! My view is that this statistic is the critical element and more job growth is needed before we see a true economic recovery and before we see empty office and warehouse space "filled up". So, we're headed in the right ddirection.
In fact, on Christmas Day, the Boston Globe reported that the recent trend of a declining Massachusetts population has reversed itself in the past year. Based on immigration trends and birth rates, we saw a positive increase in polulation from July 2008 to July 2009. Where it was forecasted that we might lose a congressional seat, this is no longer a given. To see the entire article, click reversing population trend.
I'm interested in your view of where we're headed in our hiring and general growth pattern in Central Mass. Does your crystal ball foretell more hiring in the first quarter? Second quarter? If you have any specific thoughts I'll be glad to share them with our other readers.
The various news media try to report their data accurately, I'm sure. But let's face it. We tend to create a market for bad news. If a boy scout helps a little old lady across the street - that's not reportable news. If that same scout accidentally bumped that little old lady off the side walk into the path of a moving vehicle - that's front page! And that's how I see the news media reporting about the real estate market in general and the commercial real estate market specifically. It's more newsworthy to report that mortgage defaults and foreclosures are up than to comment that a local employer in a Worcester industrial industry just rehired laid off employees or that a new company came to town and set up a new operation. These are often found on the first page of the business section, but not the front page.
My goal is to tell the story about the glass half full.
Share your stories in the comments section below so we can all feel a little better about our market. The realtiy is that as we feel better we'll respond in kind and begin to make things happen.
So, are you a glass haf full or a glass helf empty type of business person?
This article contributed by:
Robert L. Yale, CCIM
bobyale@svn.com
508-351-7079
Your Number One Choice for Central Massachusetts Commercial Real Estate