Browse Tag: Commercial

May 2013 NAR Commercial Real Estate Market Survey Released

The REALTORS® Commercial Real Estate Market Survey measures quarterly activity in the commercial real estate markets. The survey collects data from REALTORS® who are commercial practitioners. The survey is designed to provide an overview of market performance, sales and rental transactions, along with current economic challenges and future expectations.

2013.Q1 Survey Highlights:

  • REALTOR® commercial markets recorded improved conditions for both sales and leasing.
  • Sixty-four percent of commercial REALTORS® closed a sales transaction during the quarter.
  • Sales volume rose 3.0 percent from a year ago.
  • Sales prices inched up 0.3 percent on a year-over-year basis.
  • Leasing activity advanced 5.0 percent from the previous quarter.
  • Rental rates increased 1.0 percent compared with the previous quarter.
  • Concession levels declined 5.0 percent on a quarterly basis.
  • Financing remains at the top of the current challenges list, followed by pricing gap between buyers and sellers.
  • The estimated average transaction slid from $1.2 million to $1.1 million from the prior quarter.

Commercial Real Estate Market Survey May 2013

View the entire report on REALTOR.org

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Lender Language: Borrowers And Borrowing Entities

Let’s take a look at the language of lenders.

Jointly And Severally

Ever wonder what the lender in a commercial real estate transaction means when the term jointly and severally liable is used?  You hear it as a key part of loan terms when there are co-borrowers in a real estate transaction.

The term jointly and severally usually applies to situations when the borrower in a transaction is a) a real person and b) is actually more than one person.  In other words, it applies to co-borrowers.  It refers to the fact that each co-borrower is fully responsible for repayment of the loan.  Specifically, it means each co-borrower is 100% responsible for the full repayment of the loan regardless of borrower ownership fraction in the property. It does not matter if the co-ownership share in the property between, for example, two co-borrowers is 50% each — in the event one of the co-borrowers becomes incapacitated, the other co-borrower is on the hook for repayment of 100% of the loan.  Another way to put it is that jointly and severally means the debt is not shared.

Borrowing Entities

That’s fine for individuals making a loan request.  But what about when individuals aren’t making the request, but rather form a legal entity that then borrows to finance a commercial real estate deal?

[DISCLAIMER: As always, never take anything you read here at The Source as legal advice.  Always retain qualified commercial real estate counsel!]

Speaking only generally, the phrase “borrowing entity” is a bit of jargon in lending that is synonymous with the “legal entity” that is created and requests the loan.  In its simplest terms, the borrowing entity is a) not a real person b) an organization concocted by a person or a set of persons that provides a distinct legal identity set apart from the persons forming it. A classic form of this legal entity is a corporation, but it could also be a limited partnership or a trust.

The borrowing entity can borrow capital, own property, sue and be sued under its own name, and make contracts.  As such, it provides protection to its principals, and it’s the name on the deed when the deal is done.  As you can probably guess, this only scratches the surface in terms of describing possible borrowing entities.  The structure of a borrowing entity can be straightforward, or it can be incredibly complex, requiring organizational flow charts maintained by counsel to keep track of management responsibilities, general partnerships, shells and the like.   Because lenders will need to know who they are lending to, the structure must to be clear to them, or there just won’t be a loan.

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Coldwell Commercial’s College Bowl Property Finder

How can college football and listings data combine to help out commercial real estate professionals?

Once upon a time, access to listings was the largest missing piece of commercial property marketing.  Today, depending on the market, a decent supply of listings is almost a given on the web.  Nowhere moreso than at CommercialSource.com, naturally.

Solving one problem only gives rise to another.  We have more access to more data than ever before.  What we now need is to know what to do with all those listings.  How do we turn data and information into knowledge and wisdom?

One way to describe a commercial property market research is to call it an effort to watch the flow of things – people, tenants, dollars, attention, construction.  And when we look at markets nationally, we are looking for fixed locations where these flows converge — especially in secondary markets not known for their powers of economic concentration.

Coldwell Banker Commercial’s College Bowl Property Finder is a great example of how to pattern property searches around places of convergence and economic importance in secondary and tertiary markets.

Coldwell Banker Commercial College Bowl Commercial Property Finder
Coldwell Banker Commercial College Bowl Commercial Property Finder

Searching for commercial properties for sale or lease nearby to 35 games in 30 different cities was never made easier than it is here.  Use it for ad hoc economic analysis in dozens of different ways – hospitality analysis, comps, cap rate thumbnails – or plot an investment strategy centered on the economic impacts represented by the bowl games to the surrounding community.

(“Communities” would be more accurate.  In one case, I found this tool’s idea of “nearby” a little optimistic — should the Fiesta Bowl in Glendale, AZ really be listed as “nearby” to 138 miles-distant Flagstaff, AZ?    Then again, better to have too much data than too little, right? )

Tools like CBC’s College Bowl Property Finder will only grow in number across the business as time goes on and the industry continues to find ways of turning listings into gold, saving practitioners time and sparking imaginations across the marketplace.

 

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Commercial RE Markets Stabilizing, Picking Up Slightly In 2011: NAR Chief Economist

Lawrence Yun, Chief Economist for the National Association of REALTORS® sees a stabilizing commercial real estate sector for 2011, affecting retail, office and multi-family.

“The basic fundamental of rising commercial leasing demand, resulting from a steadily improving economy, means overall vacancy rates have already peaked or will soon top out,” he said.  “The outlook for the office and industrial markets has moderated with modestly declining vacancy rates expected as 2011 progresses, while the retail sector should hold fairly steady.  Still, high vacancy rates imply falling rents.”

Yun anticipates a rise in household formation from an improving economy, which will increase demand for housing, both ownership and rental.  “Multifamily housing is the one commercial sector that has held on relatively well in the past year, and can expect the best performance in 2011,” he added.

“Apartment rents could rise by 1 to 2 percent in 2011, after having fallen in 2009 and no growth in 2010,” Yun said.  “This rent rise therefore could start to force up broader consumer prices as well.”

Improving Commercial Vacancy Rates

The Society of Industrial and Office Realtors, in its SIOR Commercial Real Estate Index, an attitudinal survey of more than 400 local market experts, shows vacancy rates are slowly improving, but  rents continue to be soft with elevated levels of subleasing space on the market. The SIOR index, measuring the impact of 10 variables, rose 1.6 percentage points to 42.6 in the third quarter, but remains well below a level of 100 that represents a balanced marketplace.  This is the fourth straight quarterly improvement following almost three years of decline. The last time the commercial market was in equilibrium at the 100 level was in the third quarter of 2007; the index now matches where it was at the beginning of 2009.   Fifty-nine percent of respondents expect improvements in the office and industrial sectors in the current quarter.

Commercial real estate development continues at stagnant levels with little investment activity, but is beginning to pick up in many parts of the country.

Office Markets

NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets.  Historic data were provided by CBRE Econometric Advisors. Office vacancy rates are on the decline.  In the office sector, where a large volume of sublease space remains on the market, are forecast to decline from 16.7 percent in the current quarter to 16.4 percent in the fourth quarter of 2011, but with very little change during in the first half of the year. The markets with the lowest office vacancy rates currently are New York City and Honolulu, with vacancies around 9 percent.  All other monitored markets have double-digit vacancy rates.

Annual office rent is expected to decline 1.8 percent this year, and then slip another 1.6 percent in 2011.  In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, should be a negative 3.7 million square feet this year and then a positive 16.4 million in 2011.

Industrial Markets

Industrial vacancy rates are projected to decline from 13.9 percent currently to 13.2 percent in the closing quarter of 2011. At present, the areas with the lowest industrial vacancy rates are Los Angeles, Salt Lake City and Kansas City, with vacancies in the 8 to 10 percent range. Annual industrial rent is likely to fall 4.0 percent this year, and decline another 3.4 percent in 2011.  Net absorption of industrial space in 58 markets tracked should be a negative 25.1 million square feet this year and a positive 134.0 million in 2011.

Retail Markets

Retail vacancy rates are expected to change little, declining from 13.1 percent in the fourth quarter of this year to 13.0 percent in the fourth quarter of 2011.

Markets with the lowest retail vacancy rates currently include San Francisco; Orange County, Calif.; and Honolulu, with vacancies in the 7 to 8 percent range.

Average retail rent is seen to drop 3.4 percent in 2010 but largely stabilize next year, slipping 0.3 percent in 2011.  Net absorption of retail space in 53 tracked markets is projected to be a negative 0.5 million square feet this year and then a positive 5.0 million in 2011.

Multifamily Markets

The apartment rental market – multifamily housing – is expected to get a boost from growth in household formation.  Multifamily vacancy rates are forecast to decline from 6.4 percent in the current quarter to 5.8 percent in the fourth quarter of 2011. Areas with the lowest multifamily vacancy rates presently are San Jose, Calif.; Miami; Boston; and Portland, Ore., with vacancies in a range around 4 percent. Average apartment rent is likely to rise 0.2 percent this year and another 1.4 percent in 2011.  Multifamily net absorption should be 85,200 units in 59 tracked metro areas this year, and another 147,000 in 2011.