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We are all waiting for spring … when all things are born anew!

AND before you can get green shoots like these in the commercial real estate markets … the first step is the market fundamentals have to stabilize. At some point rent and occupancy simply must stop falling and enter the category of “No Change” as the analysts in our industry survey the national markets. Only then can the turnaround … and those little shoots … begin to emerge.

Here’s a sign we may be seeing some stabilization sooner than most pundits had predicted.

Most of the national “experts” reported in the press over the last several months have gone on record predicting it will not be until the 3rd quarter (and most then say “at the earliest”) until we see the Commercial Real Estate Markets recover.

Here is a report showing 16 of 28 major markets in the US where multifamily rents are NO CHANGE in the fourth quarter of 2009. See the report at this link …

Could this be the first sign that some “green shoots” are on the way – might they be curled up under the surface yearning to emerge when the sun comes out all the way? Stay tuned …

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Now a Rubber Chicken is pretty useless … except as a practical Joke. Let’s take a look at the most useless number in Commercial Real Estate. 

The Gross Rent Multiplier – the Rubber Chicken of Commercial Property Value Indicators.

GRM is calculated by dividing the Property’s sales price or value by the Gross Potential Income. 

Read the rest of this entry »

Can you say “BUBBLE”?

Here is a bar graph of US Commercial Property Sales closed from January 2000 to June of 2009. It so clearly tells a tale of Boom and Bust. A picture is so worth 1000 words.

Interestingly the peak is earlier than you might think. It is centered around April of 2005 – April of 2006.

This graph is taken from the just released First American CoreLogic “Commercial Market Monitor” August 2009. Get your copy here.

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The Pontiac (MI) Silverdome – former home of the Detroit Lions – just sold for $583K. That is not a typo …. $583,000

It cost $54M to build in 1975. Just think what that is in today’s dollars !!

 
The Glory Days?

• Back in 1994 Brazil beat Italy in a world cup game in this building.
• Michael Jackson, Madonna and Elvis all played there
• Pope John Paul II, once delivered Mass from the field
• But the Silverdome’s biggest event was Wrestle Mania III in 1987, when 93,000 fans packed into the stadium to watch Hulk Hogan body-slam Andre the Giant. That was the biggest turnout ever for an indoor sports event.

The Detroit Lions NFL team hasn’t played there since 2002 and the buidling was costing the city of Pontiac $1.5M to keep up.

The new owners are going to host MLS Soccer Games (GO SOUNDERS!)

Here’s the full article.

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 In a more normal market … where there is a reasonable volume of Property for sale and a reasonable number of Buyers … we recommend you build your Lead Generation System around active Brokers and Commercial Agents. In normal times the vast majority of Properties change hands through the Commercial Broker & Agent networks. 

What happens we you raise Billions to snap up distressed Commercial Real Estate Assets and no one is selling? I guess you twiddle your thumbs and chomp at the bit.

The Real Deal is reporting Tony James, president of the Blackstone Group (they have $12B ready to spend on Real Estate) as saying …
“We’re just beginning what will be the best period in decades for private investing,”

And yet deal volumes remain at all time lows because banks continue to hold troubled loans on their books, hoping conditions will improve.

There does appear to be movement amongst smaller banks and smaller deals however. Ofer Cohen of  TerraCRG says,

“Smaller or local banks are more proactive about either unloading bad debt or taking over the deeds on distressed notes and disposing [of] them.”

Here is the full article

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How is the apartment market looking in Los Angeles? Here is a pretty darn good video interview with Kitty Wallace of Sperry VanNess on just that topic.

She reports that her contents are pointing to the 3rd quarter of 2010 as the expected time when sales volumes will pick up. We’ll see …

Globe Street announced today that Lance Armstrong is forming a commercial real estate investing company focused on central Texas markets. He has $100M to play with.

One of his partners, Lance Sallis, a 20-year real estate veteran, was previously managing director with Trammell Crow Co.’s Austin office. Here is what Sallis had to say about the commercial markets. Basically FULL SPEED AHEAD!

“Now’s the right time,” Sallis explains. “There’s been a re-pricing of institutional quality commercial real estate assets, and all of this creates a huge buying opportunity for groups willing to buy, hold and reposition properties.”

Here is the full article

Learn Commercial Property Investing inside and out … Investortours.com

There it was in the Wall Street Journal last week. The headline in the Real Estate Section blared,

“Apartment Vacancy Rate Hits 22-Year High !” and I murmured to myself … here we go again.

It just reminded me why newspapermen are NOT Real Estate Investors … they are just out to sell papers and a sensational headline will always beat out a rational article.

But wait … there’s more …

If you read the last line of paragraph three you found that, “Of the 79 Markets tracked by REIS, 45 showed an increase in Vacancies.” That sounds really BAD now doesn’t it? We should panic … right? Hmmmm … Remember now, this is coming from a newspaper and there is most certainly more to this story. Hold on just a minute …

As an Investor, what I find MOST interesting in this article is this.

• In the face of the worst economic downturn since the great Depression.
• In the face of the worst residential housing market in anyone’s living memory
• In the face of hundreds of thousands of foreclosed / vacant / rental single family homes competing with apartments for renters
• In the face of ALL of this …

43% of the markets tracked by REIS showed STABLE OR DECREASING VACANCIES !!

That’s right 34 of those same 79 Markets preserved or decreased their vacancy rates. That statistic is truly amazing given the national economic circumstances. And that’s not all … In the next to the last paragraph we learn that suburban Maryland and Washington, D.C. even saw a 0.3% rent increase in the second quarter. WOW.

What is the Press Missing here?

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Today Globe Street reported on a “Meet the Experts” panel discussion in Century City California … and what they had to say augurs well for smaller commercial investors in the months ahead.

All the experts lamented the puny deal volumes this year and none of them seem to have a clear prediction of when deal flow will pick up however …

When asked, “How would you invest $3M in this Market?” Here is what they said … Read the rest of this entry »