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Entries Tagged as 'Office Space Negotiations'

Fed Reports a Pause in Credit Tightening... Except for Commercial Real Estate

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Most large banks have stopped tightening standards on a number of loan types, according to a new report from the Federal Reserve. But the central bank’s latest loan officer survey says that while it may not be getting tougherfor consumers to borrow, it’s not getting any easier yet either because financial institutions have yet to unwind the considerable contraction that has built up over the past two years.

Market observers continue to lament the lack of financing available in the commercial sector, particularly with an estimated 1 in 5 commercial mortgages maturing over the next two years. If property owners are unable to roll this debt into new loans, analysts fear another real estate calamity could be on the horizon.

Full Article at DSNews.com

Buying Office Space , Office Building Sales , Office Space , Office Space Negotiations

Worst to come in U.S. commercial real estate

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NEW YORK, Feb 1 (Reuters) - The worst may not be over for commercial real estate loans as vacancies remain high and rents decline, threatening the financial system with substantial losses, Standard & Poor's said on Monday.

"The fallout from commercial real estate exposures for banks has yet to run its course, in our opinion," S&P said in a report.

Although problems are already evident in the homebuilding and commercial construction sectors, they have yet to be felt in the larger mortgage lending and multifamily sectors because interest rates are low and cash flows are adequate to service debt, the rating agency said.

However, as interest rates rise and rent rolls decline further, delinquencies will rise and prices will fall further in these sectors as well, S&P said.

"Even though most highly exposed banks with weaker balance sheets are already rated below investment grade, more downgrades are possible," S&P said. Indeed, S&P already has negative outlooks on about 75 percent of the rated banks with the largest commercial real estate exposures, indicating they are at risk of a downgrade.

Despite the potential for heavy losses, however, most banks' capital is sufficient for them to pull through as long as the losses are realized over a few years and liquidity is maintained.

"Commercial real estate exposure generally tends to represent a higher proportion of smaller, largely unrated community banks' exposures," S&P said. "Therefore, there is a greater proportion of risks in the unrated banking sector.

Buying Office Space , Office Building Sales , Office Space , Office Space Negotiations , Office Vacancy Rate

Subleasing Office Space Can Be Risky If You Are Not Careful

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With all of the available office space available throughout the country And the economy still in the dumpster, many business are looking towards subleasing as a way to save money on their office rent. In almost every case a tenant can save anywhere between 10% and 50% off the current market rents through a sublease. It sounds like a good deal and in many cases it is, but as in all investments the return (savings) is related to risk. Subleasing space is a risky proposition.  One in which it is very important to have a qualified expert assisting you to make sure you avoid costly mistakes or even worse, potentially cause your business to go under.

What are the risks?

First and foremost, what happens if the former tenant sub-landlord goes bankrupt? Most leases have a clause in them cancelling the lease or giving the landlord the right to cancel the lease if the tenant declares bankruptcy. If this happens and you do not have any protections, you will either be out on the street or paying higher rents.

What happens if you are paying rent to the former tenant sub-landlord, but they are not paying the landlord the full amount of the rent due? They are in default of the lease and therefore you are too.  What happens if the landlord decides to give them the boot? Will you be able to stay in the space at the same rate you are currently paying?  There is no guarantee that your sub-landlord will fulfill their obligation to pay the remainder of the rent or even the rent you pay to them to the landlord.

Although rare, hazardous waste can be another issue, especially if there is land involved. If your sub-landlord caused any hazardous waste, you could find yourself liable to clean it up. Cleaning up hazardous waste is not cheap.

There are ways to protect yourself when you are subleasing office space, but each sublease brings on different nuances that will need to be handled uniquely. A good real estate professional, such as the ones we have with OfficeFinder, will be able to mitigate the risks for you through a number of different means. The most important one would be a no-disturbance agreement signed by the Landlord and notarized. Not all landlords will agree to one, so other means of protection will need to be developed.

If you decide to sublease office space, make sure you protect yourself by partnering with a qualified real estate professional. You will be glad you did.

Office Relocation , Office Rental , Office Space , Office Space Negotiations , Sublease Office Space

CBRE Econometric Advisors Sees Q3 2009 as Market Bottom for U.S. Commercial Real Estate Total Returns

Returns are Expected to Remain Negative in 2010, With Positive Value Growth Foreseen in 2011  


Boston – January 11, 2010 – The downward slide in total returns from U.S. commercial real estate reached bottom in Q3 2009, but returns will remain in negative territory for most of 2010 before resuming positive growth in 2011, according to a new analysis from CBRE Econometric Advisors (CBRE-EA, formerly CBRE Torto Wheaton).

As measured by the NCREIF1 Property Index, total returns have declined 23% for office, 21% for industrial, 15% for retail, and 23% for multifamily compared with peak levels in 2007. CBRE-EA believes that these declines constitute the bottom of the current cycle across all property sectors, and in the firm’s base-case (most likely) scenario, returns are expected to improve, but remain in negative territory throughout 2010.  By the end of 2011, CBRE-EA sees commercial property producing total returns of 3% to 11%.

Total returns comprise the change in the market value of commercial property (appreciation or depreciation), plus cash yields (income)

Entire Article

Buying Office Space , Office Space , Office Space Negotiations

Will The Office Market Reach Bottom In 2010?

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From Cushman and Wakefiled's Knowledge Center

"THE AMERICAS: LOOKING UP

Things are looking up for a recovery and job growth in 2010 that will benefit North American real estate markets. Meanwhile, South American countries such as Brazil will continue to heat up.

National real estate markets are likely to remain weak particularly early in the year due to uncertainty about the strength of the recovery. This will benefit tenants seeking to secure moderately priced space.

But as recovery takes hold, markets will reach a bottom and begin to improve. The key will be employment growth which, because of the depth of the downturn, may turn out to be stronger than is generally anticipated."

What struck me in this quick overview is that the bottom is a ways away. With last weeks jump in newly laid-off workers filing claims for unemployment benefits, the recovery may be further away than we hope. Unemployment is directly linked with office vacancy. Businesses must add employees to take on additional office space. I believe that there is still a lot of underutilized office space that companies have leases on, but are not using that will have to be filled before we see any reduction in the office vacancy rate. A recovery in 2010 would be great, but I believe the Office Space market will not start it's recovery until 2011.

I am off next week. Happy Holiday to all.

 

 

Commercial Real Estate , Lease Negotiations , Office Rental , Office Space , Office Space Negotiations , Office Vacancy Rate