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.......
They are scrambling to determine both the immediate and long-term impacts on their property’s value. These owners have been calling their real estate service providers regularly to hear the sentiments they’ve collected through numerous conversations with others in the marketplace. “What are you hearing out there?” is often asked on these calls as this real-time information provides valuable insight for their unique situation. So, what are people saying now? To give away the punchline, people are saying that industrial property is the most well-positioned asset class and it has taken the smallest loss in value (if any loss) as a result of recent events. What does that mean for the value of your industrial property? It means it has not changed much over the past few months.
But what has changed, and how could that impact value now or in the near future? First, financing has tightened up and sourcing capital to fund acquisitions can be time consuming and challenging. Second, consumer confidence is in question as there are many unknowns that remain regarding the recent turmoil, both locally and internationally. Third, the United States domestic manufacturing outlook is optimistic for the future as reasonable speculation persists that United States manufacturing will experience a renaissance, in part to support our national security. Finally, “Location, location, location” always reigns true in real estate, but what has changed is that California has become increasingly harder for landlords and property owners – as this post is written, two significant items are in the works. One could undermine contractual obligations of tenants and the other could drastically increase the property tax burden in California.
While industrial values presently remain high, even in light of these geopolitical events and mounting pressures against landlords in California, owners reluctant to sell their property may want to reconsider. The opportunity to sell now and recognize these high values provides owners significant access to their equity that can be used or reinvested in any number of ways, even after the tax implications of the sale. Always remember to consult your CPA.
So how do you determine the value of your property? Start by having a thorough discussion with our team.. Contact us today! We will provide useful comments to you on both the immediate local market conditions and how your property compares with others.
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.