These recent events across the globe and in the United States have sent many property owners and managers scrambling to determine the property’s value (including current rents), and more importantly, what course of action they should take from here. These owners have been calling their real estate service provider regularly to hear the sentiments they have collected through numerous conversations with others in the marketplace. “What are you hearing out there?” is often asked of brokers by owners, as this real-time information provides valuable insight for their unique situation. Since industrial property is currently the most well-positioned asset class, owners need to consider how the decisions they make now can significantly impact the property’s immediate worth and the cash flow that owner receives in the coming years.
Let’s look at what has changed recently. First, financing is challenging as banks navigate substantially higher interest rates and the fallout from failures at regional banks. Second, continuing conversations of geopolitical conflict and discussions of war(s) causes consumer confidence to weaken and spending to diminish as the recent turmoil persists, both locally and internationally. Third, the United States domestic manufacturing outlook is less optimistic now, as global integration and mutual reliance persists from our current administration. Additionally, “Location, location, location” always reigns true in real estate, but what has changed is that California has become even increasingly harder for both property owners and operators to do business here (regulation, taxation, cost to occupy).
Even with this uncertainty, industrial rents in Sothern California continue to climb, and sale prices are holding their value. Industrial property owners who were previously reluctant to sell their property may want to now reconsider and explore taking their proceeds and reinvesting in other assets. Conversely, owners who do not want to sell need to then look closely at their current lease arrangements and upcoming opportunities to make a change, so they can make sure they are receiving maximum cash flow. We have helped several business owners wind down or sell their business and then keep the property and rent it out as landlords, dramatically increasing their cash flow and also improving their quality of life. Always remember to consult your CPA.
So how do you determine the value of your property, and more importantly what do you do with that information? Start by having a thorough discussion with our team. We will provide useful comments to you on both the immediate local market conditions and how your property compares with others.
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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.
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