Feb 23, 2010 - CRE News
Fundamentals for small-capitalization properties have continued to deteriorate, according to Boxwood Means Inc., with key metrics such as rents and tenant demand weakening last month.
National rents were down across the board in January when compared to a year ago. The declines range from 3.34% to $18.94/sf for medical-office buildings, to 8.23% to $7.17/sf for industrial properties. Office properties in general saw a 4.04% decline in rents to $17.57/sf, while retail properties have seen a 6.31% drop to $17.55/sf.
When compared to a month earlier, rent declines ranged from 0.2% for medical offices to 0.74% for industrial.
Boxwood Means is a Stamford, CT, research firm that focuses on small-cap properties, which it defines as those with less than 50,000 square feet. It compiles property-level operating and sales data through a partnership with LoopNet Inc.
It also compiles Days on Market, a calculation of how long it takes to rent vacant space that it uses as a gauge for tenant demand. It said the metric is at its highest level in nine months, meaning space is languishing on the market.
Despite the bad news in the data, Boxwood Means noted that declines in rents and demand are no longer as steep as they were in previous months. But it cautioned that fundamentals would continue to weaken until the national jobs picture improved and consumer confidence rose. Today, the Conference Board reported that consumer confidence had fallen sharply this month.
Entries Tagged as 'Buying Office Space'
Feb 23, 2010 - CRE News
Washington Post February 19, 2010: Unlike residential mortgages, which often can be paid over 30 years, commercial real estate mortgages typically must be paid off or refinanced within five years. Commercial properties mortgaged in 2005, 2006 and 2007, at the height of the boom, are reaching their maturity date. "Do the math on this," Warren said. "This is a significant problem."
Nationwide, at least $1.4 trillion in commercial real estate debt is expected to roll over during the next three years. Warren said that half of commercial real estate mortgages will be underwater by the beginning of 2011. A fifth of residential mortgages are underwater now, she said.
Unlike residential mortgages, which often can be paid over 30 years, commercial real estate mortgages typically must be paid off or refinanced within five years. Commercial properties mortgaged in 2005, 2006 and 2007, at the height of the boom, are reaching their maturity date. "Do the math on this," Warren said. "This is a significant problem."
Buying Office Space , Commercial Real Estate , Office Building Sales , Office Space , Office Space Negotiations
It is a good time to buy office space if you have the cash. With the markets as depressed as they are, prices have dropped significantly on office building purchases. Reading the news, you will see many stories of lost office buildings or office buildings sold at a loss stories. Check out our Lease vs Buy section to find out if it would be a good decision for you.
One way to get into an office building purchase is to take advantage of the SBA’s 7(a) Loan Program: “This is SBA’s primary and most flexible loan program, with financing guaranteed for a variety of general business purposes. It is designed for start-up and existing small businesses, and is delivered through commercial lending institutions.
The 7(a) Loan Program is SBA’s primary program to help start-up and existing small businesses obtain financing when they might not be eligible for business loans through normal lending channels. The name comes from section 7(a) of the Small Business Act, which authorizes SBA to provide business loans to American small businesses. SBA itself does not make loans, but rather guarantees a portion of loans made and administered by commercial lending institutions.”
The SBA also offers the HTML clipboard CDC/ 504 Loan which provides long-term, fixed-rate financing to small businesses to acquire real estate or machinery or equipment for expansion or modernization. Typically a 504 project includes a loan secured from a private-sector lender with a senior lien, a loan secured from a Certified Development Company (CDC - funded by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the total cost, and a contribution of at least 10 percent equity from the borrower. The maximum SBA debenture generally is $1.5 million (and up to $2 million in some cases).
Generally, you will need only 10% down and can borrow up to $2 million. Since this is through a traditional lender, you will need to meet their standard qualifications and probably only qualify if you are in a large market. The banks do not want to have to take advantage of the guarantee. If they do too often, they will find themselves off the list of banks allowed to make the 7a loans.
See our Financing Section for other alterntives.
Buying Office Space , Office Building Sales , Office Space
So we have 2 apparently conflicting reports on the same day. The Fed survey tells us loans are not loosening for commercial properties and then the Mortgage Bankers tell us that they increased in the 4th Quarter of 2009 over 2008. What's going on?
It seems pretty apparent what is happening, but it could be a confusing to some trying to figure it out. Basically, originations immediately after the crash in 2008 would have come to a standstill, 4th Q 2008 originations would be nil for commercial properties. Everyone was on hold. Even a very low number of originations in 4th Q 2009 would be an increase. I'd be interested in finding out the numbers for 4Q 2007 and comparing to that. It seems to me to be a PR play by the Mortgage Bankers to have the public believe that they are doing commercial lending.
The Mortgage Bankers Association (MBA) reported on Tuesday that commercial mortgage originations were at a higher level during the last quarter of 2009 than in either the previous quarter or in the 4th quarter of 2008, but multifamily originations continued to lag. The data was part of the MBA's Quarterly Survey of Commercial/Multifamily Bankers Originations.
Source: MND News WireBuying Office Space , Office Building Sales , Office Space