“What I’m Seeing in Commercial Real Estate”

What I’m Seeing
Sales activity is down 80% from the last couple of years. The Seller/Buyer disconnect is not so much value based anymore, but loan based. After 18 months of disbelief that the market value of their property has dropped so greatly, our Sellers are caving in. Many of them would gladly sell at very discounted prices to be done with it, but cannot due to an existing loan that the bank will not commit to short. Additionally, banks are not loaning money freely and buyers with cash want to buy at the unrealistic $.25 on the dollar for fear of additional value reductions.

Leasing is activity is increasing however. We are finally starting to see activity from tenants and landlords alike. Our phones are ringing once again and we are receiving multiple calls per week on most listing assignments. Although overall deal velocity is still slower by comparison to two years ago, this is an encouraging sign. The typical deal sizes are definitely smaller, which is a good indicator that small businesses are pushing their way out of the recession as they have done in the past. Most large corporations are still reeling from the losses they took and are still in an overhead reduction stage, so the deals that are getting done have been more with the small entrepreneurial businesses and government(stimulus related) users. I can honestly say that we are seeing some very aggressive landlords out there. We have been offered 12 months free rent, flexible term lease agreements, below market rent short term fully furnished subleases, $50 per square foot in Tenant Improvement allowances for already improved space, no personal guarantees(less than stellar credit) and 8% co-broker commissions. It’s definitely a Tenant’s market.
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