Recent reports show a stark contrast in leasing trends for office space for rent in the commercial real estate market. While foreign investors appear to be making a play for prime commercial space, reportedly increasing year-over-year investments by over 83%, office construction has waned by nearly 17%. Why the sharp conflict in data?

Analysis shows that there area opportunities using tools to gain an investment advantage in the market- but this can be challenging for business investors who are focused on building clientele and daily operational management of the company.

Current and Future Space Needs

Whether the tenant will be a small operation or a larger company the basic needs are the same- efficiency, cost effectiveness, room for expansion, and strength of location. A good tenant rental representative can gather the information regarding these needs and complete an analysis upon which available locations can be ranked, investigated, and negotiated. If your company is currently housed in an inefficient space the multi-step processes necessary to keep everyone 'in the loop' can create redundancy and confusion. While a move can be costly, done correctly it can reduce future costs significantly. Would moving from your current location disrupt client service? Or are you able to make a move without affecting the product or service you provide? Then you may consider...

Market Availability

Thorough knowledge of the region including up-and-coming micro-markets can be the key to entering a market segment previously unconsidered. Sluggish commercial rentals have also slowed the rate of construction, so existing space becomes more appealing and potentially more negotiable. Recent reports also state that this shift in the market is creating an increase in tenant concessions and free rent, despite the increase in square foot pricing. Previously untapped commercial properties, or those that may be re-zoned to accommodate businesses, can be an ideal solution to a limitation in new construction. Repurposing of properties is a popular trend and is gaining in favor with clients as well. People tend to be drawn to the historic or recognizable- tourists included- and appreciate the visionary who takes on a forgotten space. 

Investment Potential

A volatile leasing market creates uncertainties in investing- how can you determine (or try to predict) the rate of return for your rental investment? Or reduce your potential for overpaying? Foreign investors see the potential for future profits in taking a measured risk in office investments. The leasing velocity of a space, which includes knowing historic rental values, re-leasing potential, and vacancy rates all play a role in the final dollar values. Perhaps you are feeling bound to a lease that is just not amenable to your needs, or the structure of your contract is no longer in league with the community averages? A proper representation of your needs, which may even need an overview, can leverage your remaining time in the space and perch you at a better vantage point for future negotiations. More about leasing office space vs. buying.

Due diligence is a necessary factor in renting office space and a strong real estate partner allows you to focus on your business during the negotiations of a transaction. Contact us and allow us to introduce you to the advantages of using a tentant representative while seeking rental office space for your commercial business needs.

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By: James Osgood

The effects of the financial crisis of 2008-2009 rippled throughout the U.S. economy like a pebble hitting a still lake. The commercial real estate market was hit hard, of course, and unemployment soared, especially in industries tied to real estate.

Credit to finance commercial real estate all but vanished. While the credit markets are finally starting to thaw, it can still be difficult for business owners to secure the financing they need to purchase or renovate commercial property.

Small Business Administration (or SBA) loans are one option that can help many business owners who are struggling to obtain financing. SBA loans are made through regular banks, but the SBA guarantees repayment of a portion of the loan, which helps reduce the bank’s risk.

There are several different types of SBA loans — including the SBA 504 loan, which is often used to finance commercial real estate. SBA 504 loans are available to for-profit small businesses for the acquisition and improvement of owner-occupied commercial property. They offer fixed-rate, long-term financing with 90 percent loan-to-value and a 10- or 20-year amortization schedule.

Here’s how 504 loans work: The bank provides 50 percent of the financing and the SBA 40 percent, while the business owner kicks in the remaining 10 percent. This can provide a huge cash flow advantage compared to a traditional commercial mortgage, which might require a down payment of 20 to 30 percent or more.

For example, with a $500,000 piece of commercial property, the down payment on a 504 loan would be just $50,000, compared to $150,000 or more with a traditional commercial mortgage.

Some changes were made to the SBA loan program by the Small Business Jobs and Credit Act that make it even more attractive. The Act increased the SBA 504 loan limit to $5 million and it expanded the definition of a small business for the purpose of applying for an SBA loan. Any business with a tangible net worth of under $15 million and average net income over the past two years of under $5 million can now apply for an SBA 504 loan.

There’s a wide range of latitude when it comes to how the proceeds from a 504 loan can be used. These include:  finance the purchase of land and existing owner-occupied buildings, construction of new facilities, grading, street improvements, utilities, parking lots, and landscaping, as well as modernizing, renovating or converting existing facilities. Soft costs like architectural and legal fees, environmental studies, appraisals, interest and fees can also be rolled into the 504 loan.

Keep in mind that not all banks are created equally when it comes to SBA lending. Be sure to look for a bank that is designated as an “SBA Preferred Lender.” These banks follow a streamlined method of underwriting SBA loans, which usually enables them to process SBA loan applications faster than banks that aren’t SBA Preferred Lenders.

Also, just because a loan is “SBA-guaranteed” doesn’t mean the bank will be any less diligent in its loan underwriting process. You’ll need to prepare the same kind of thorough loan application package for an SBA 504 loan as you would for a traditional commercial mortgage.

SBA 504 loans aren’t a panacea that cures all the ills of the commercial real estate credit crunch. But in the right circumstances, they could help you get the financing you need for a commercial real estate project.

Guest Article by our Atlana OfficeFinder Specialist

More about Financing Office Space

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Business owners face an important decision when determining whether the purchase or rental of office space is best.  When making this determination, a number of things need to be taken into consideration in order to make precisely the right choice.

One of the biggest factors to consider is the amount of cash that can be put out up front. Entrepreneurs must usually put out more money in the beginning whenever they are buying office space rather than leasing it. That’s because they must generally pay for appraisals and building inspections in addition to providing a down payment. Since young businesses could be struggling to come up with operating cash, many of them elect to rent office space until they have become better established.

A disadvantage to renting rather than buying is that it is easier to develop a long-term budget when buying. That’s because monthly mortgage payments tend to stay the same over the life of the loan, whereas rental costs can increase from time to time. Rent is typically based on current changes in the market, so the amount of fluctuation in a given area should be considered carefully when choosing whether to rent or buy.

Renting gives business owners greater flexibility when it comes to moving their establishment. Those who purchase office space could find themselves being unable to relocate until they are able to sell their current building. When buying commercial property, it’s important to think about the future needs of a company. That way, business owners can make sure there is ample room for expansion at their current location so that moving the establishment later is less likely to be necessary.

At Office Finder, we understand the dilemma business owners face when choosing whether to rent or buy property.  We currently serve over 550 markets, and offer office space for rent or for purchase. Contact us today to find office space located in your area.

For more detailed information visit our lease vs buy page and/or click on the Lease vs Buy link below which will take you to more blog posts.

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By: James Osgood

Surely if your business is firmly entrenched in the market, you have significant financial resources, and you plan on keeping your business in the area for many, many years to come, buying your commercial office space may be the way to house your business. Yet, you may still want to consider renting an office space. Here's why:

• Lower Initial Investment - You won't tie up money you could use in your business. Many businesses get a higher return from their core business than they would from buying an office and the associated savings and appreciation.
• Fixed or Adjustable - Every homeowner knows the pros and cons to this option. Do you want to pay the same amount every month for your property, or do you want to gamble with the potential of rising office rental rate costs. Ultimately, the market will tell dictate what your business will pay for rent. In a down economy, the idea of renting can be lower cost and offer significantly lower risk. The unfortunate Catch-22 here is that if the economy is good, your business will flourish, but you may end up paying some of that profit back in rent. But, then again, isn't that a nice problem to have?
• Flexibility - Renting your office space also affords a business the opportunity to grow their office space along with the growth of their business. As your business expands with staff, operations, and more; renting an office will allow you to buy more or less office space as the situation dictates accordingly. This level of flexibility can provide a business owner with the peace of mind of knowing that they're not locked into an enormous space if they don't need it or too small of a space if their business has outgrown it.

More Information on the decision of whether to buy or rent office space.

"OfficeFinder, LLC" is the leading web based office space referral and information network, with highly qualified local office space leasing and sales professionals in over 550 markets. 

Contact us today to find the right location, negotiate the best price, and avoid costly mistakes. We would love to help your business find the best property available!

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By: James Osgood

So business is going strong, and now you are beginning to wonder if it’s time to stop pouring all that office rent money into someone else’s pocket rather than investing in office space of your own. After all, commercial mortgage interest rates are still quite low, and your company’s success indicates a bright future ahead. As you consider this important shift in business strategy, here are some things to consider.

• Is now really the time? We ask this question not just with regard to interest rates, but also with regard to your company’s future growth. If your business continues to expand, will you find yourself, in another few years, running out of office space? If you are still in a period of growth, sticking with leasing may be preferable, because it provides more flexibility for future expansion. You should only purchase office space if you are quite certain that your future needs will be met by the space you purchase.
• Where do you want your headquarters? Here we are thinking “bigger picture.” Think beyond whether the area you are considering is a prestigious, or up-and-coming, location for your company’s headquarters. It would be wise to do some research—and we can help—about business trends in your city. You need to think not just about what things are like now, but what they might be like in the future.
• Is the area of town you are considering going to be the right place for your business in twenty, or fifty, years, not just for the next five? Will the area’s infrastructure (roads, bridges, restaurants, etc.) meet your needs in the years to come? If you are counting on some appreciation in the building’s value over time, it’s important to make sure you are buying in an area that will continue to grow.
• Is this a good financial move for you? In addition to paying a mortgage company instead of a landlord, you will need to factor in your upcoming capital needs and cash flow considerations, as well as the tax consequences of making the purchase.
• Are you ready to be your own landlord? This is a very important consideration, because when you lease space, it’s easy to call the landlord if the toilet backs up, or expect that the icy sidewalks will be cleared by the time you show up for work. If you own the property, those responsibilities, and more, will now be yours.

These are just a few of the questions that you should be considering as you discern whether to lease or buy in this market. We have more information on lease vs. buying office space and we suggest you contact us to conncet with on of our local pros to further discuss this exciting possibility.

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By: James Osgood