Over the past three to four months one big question continues to present itself: “what is the value of my property now and in the future?” One definition for value is “the importance, worth, or usefulness of something.” When considering real estate, usefulness is good to know, but people really want the specific monetary amount the property is worth. Well, in most stabilized markets, present value or worth is generally determined by looking at the recent sales comps, adjusting for the unique features present or absent at your property, discounting cash flows, and then allowing offers to materialize which validate (or invalidate) the seller’s price expectations. However, the reason so many people are asking lately is because we are in anything but a ‘stabilized market.’
Recent events across the globe and in the United States have sent many property owners and managers scrambling.......
As we continue to consider the impacts of the COVID-19 pandemic and subsequent economic shutdown, let’s turn our attention to the area of heavily improved industrial buildings, those with greater than 5% to 10% office build out. Many companies presently doing a property search and comparative analysis with their Broker/Agent have now realized that while their warehouse requirement has remained, the office size portion of the requirement has diminished. Companies are finding office employees can do much of their work from home. This holds true for office employees in warehouse buildings as well as high rise office towers.
So, what can a company that is looking for space do when an available building provides essentially everything that company needs in a facility but has too much office? Conversely, what can a landlord do when a tenant will not offer or move forward on their property because the tenant does not want to pay for extra office they will not use.? Answer: (i) Have the Landlord remove the unneeded office space if that does not reduce the total building square footage, or (ii) Discount, or back out, the unneeded office space from total rent calculation (see below example).
I hope this note finds you well, healthy and safe with your family. I understand these are hard times and my sympathies are with those who have been adversely affected by this Corona Virus and subsequent economic fall-out. I hope you and your loved ones are safe and sound.
On the real estate “big picture,” industrial property is still well positioned compared to other asset classes. The demand for higher stockpiles of essential goods and medical equipment coupled with the probability of a manufacturing renaissance bringing production of those goods to USA manufacturers further helps the long-term outlook for industrial property. This will help protect the higher values industrial property has achieved over the last several years.
With the rapid changes the world has seen in the past few weeks, businesses are scrambling to adjust as we go through the uncertainty which accompanies what is being called ‘a global pandemic.’ While we hope the current health scare runs its course quickly, the lasting effects on businesses will be felt for at least the balance of the year. While the long-term impact remains uncertain, in the short run businesses are already asking the questions associated with covering their overhead for the next 30-60 days: where will that money come from? One potential source of additional income may be.........
After working with many investors, the conclusion is generally “no.” While the Cap Rate, is an important barometer when evaluating options, there are other significant factors that investors must look at when making selections.
Let’s look at several here:
2. Building Characteristics/Features
3. Credit worthiness & history of the tenant
4. Cost Basis and Market Rent
5. Upside Potential or Value-Add
READ THE BREAKDOWN OF EACH BELOW
Christopher J. Destino, SIOR, a Principal at Lee & Associates, is an engaging, responsive professional who enjoys working closely with his clients and helping them succeed.