Where Are The Buyers ???
According to Steve Timmel of Grubb & Ellis West Shell 94% of the Cincinnati area office/industrial deals completed in the last 36 months have been to buyers from outside the Greater Cincinnati area. This statistic is astounding ! What is it about the Greater Cincinnati commercial real estate market which is so attractive to out of state buyers and investors ? Could the stability of the economy and lack of large swings have something to do with it ? After what we have all been through in the last 24 months a commercial/industrial market such as Greater Cincinnati is like a breath of fresh air. The new normal to coin a phrase !
I was recently in the offices of the FBI Cincinnati Division attending the FBI Citizens' Academy program, and it made me think about a leasing opportunity (in addition to thinking about what an awesome job our FBI really does and how dedicated and effective are our FBI professionals). The recent economy has resulted in higher vacancies for our commercial properties and less demand for the resulting vacant space. In a general sense, our government has stepped in as consumer to invigorate the economy. Maybe our government also represents an opportunity for the commercial real estate market. The government has to occupy space, whether by lease or purchase. I have represented a landlord who leased space to a governmental office (a state judge), and there are several issues that arise which are not present on a typical retail or office lease. For example, the background of the Landlord becomes an issue, there are restrictions on the parties the Landlord hires at the site and the terms of such engagements, security is extra important and the tenant may require the right to terminate if its budget is changed. In addition, certain government offices may not be desirable in a a multi-tenant property. So while the government may be an opportunity, be mindful of their needs and the costs to comply with the same.
Parts 1 and 2 of this series on “The Commercial Real Estate Loan Market” examined differing views on the fallout of current and anticipated loan failures in the commercial real estate (“CRE”) industry. While all agree that losses will be significant, just how significant remains to be seen. Unfortunately, we don’t have a crystal ball to let us know which scenario or combination of factors will play out, and, like any forecast, we have to accept that there will be yet unknown events and circumstances which change the outcome. In the meantime, however, it is important for any participant in the CRE industry to understand the economic factors which shape the business decisions and perspectives of the players who hold and/or deal in CRE. These forces will impact all aspects of the CRE market, including, but not limited to, the market for and terms of CRE sales, the availability of financing and underwriting requirements, workout options (or lack thereof) for troubled CRE loans, and local and regional development. Understanding of the macroeconomic and microeconomic environment and acting strategically using that knowledge is an important key to success – or, perhaps, given the current economic climate, survival – in not only the CRE industry but any industry. Regardless, there are now and going to be abundant opportunities !
In contrast to the recent position taken by the Congressional Oversight Panel in their February 10, 2010 report mentioned in Part 1 of this series, there are economists, businesspeople and policymakers who have a less bleak forecast for the commercial real estate (“CRE”) loan market. One such example of this “non-crisis” position was presented in a research report by UBS Financial Services, Inc. entitled “
The commercial real estate (“CRE”) loan market is floundering and is expected to increasingly experience high levels of losses over the next several years. The question on interested minds is whether the fall-out from CRE loan failures will mimic the devastation caused by the crisis in the residential mortgage loan market. Recently, the Congressional Oversight Panel, established pursuant to the Emergency Economic Stabilization Act of 2008, issued a bleak, if not frightening, report on the implications these anticipated losses in the CRE market and repercussions to the greater economy. The report, entitled “
