Taking Advantage of a Weak Commercial Real Estate Market
From 2009 into 2010, the commercial real estate market was definitely one for buyers and renters. Space increased until it reached a peak in the fourth quarter of 2010. There now are signs of a slow recovery, but it’s still definitely a tenant and buyer market.
Many small businesses have taken advantage of the current market conditions to negotiate more favorable lease terms or lower rents, with some actually moving to better spaces with the same landlord at lower rents.
But, it’s not just a tenant’s market. Many businesses that couldn’t have considered buying their building in the past are now finding opportunities to cut some great deals and become owners. Or, they simply find a comparable or better location they can buy that brings reductions in costs from the rent they were paying previously.
Example: One principal in an investment firm was paying $4500/month rent for 700 square feet in Mount Kisco, N.Y. He had previously looked at a building in nearby Chappaqua, but the asking price was $1.3 million. Timing is everything, and in March of 2010, he got the building for $600,000. It was an older building in need of repairs, so he invested another $250,000. His mortgage payment is now $3500/month.
However, the best part is that he has enough room now for a tenant, and found one who is leasing space for $2400/month, bringing his net payments down to $1100. Due to the Small Business Jobs Act of 2010, the entire cost of his renovations was deductible as well.
For Investors
Of course, if you’re renting office space, take a look at how you can negotiate a better deal. But, even more of an opportunity is the current depressed pricing for quality commercial real estate. Tenants are out there, and bargains for purchase are as well.
From 2009 into 2010, the commercial real estate market was definitely one for buyers and renters. Space increased until it reached a peak in the fourth quarter of 2010. There now are signs of a slow recovery, but it’s still definitely a tenant and buyer market.
Many small businesses have taken advantage of the current market conditions to negotiate more favorable lease terms or lower rents, with some actually moving to better spaces with the same landlord at lower rents.
But, it’s not just a tenant’s market. Many businesses that couldn’t have considered buying their building in the past are now finding opportunities to cut some great deals and become owners. Or, they simply find a comparable or better location they can buy that brings reductions in costs from the rent they were paying previously.
Example: One principal in an investment firm was paying $4500/month rent for 700 square feet in Mount Kisco, N.Y. He had previously looked at a building in nearby Chappaqua, but the asking price was $1.3 million. Timing is everything, and in March of 2010, he got the building for $600,000. It was an older building in need of repairs, so he invested another $250,000. His mortgage payment is now $3500/month.
However, the best part is that he has enough room now for a tenant, and found one who is leasing space for $2400/month, bringing his net payments down to $1100. Due to the Small Business Jobs Act of 2010, the entire cost of his renovations was deductible as well.
For Investors
Of course, if you’re renting office space, take a look at how you can negotiate a better deal. But, even more of an opportunity is the current depressed pricing for quality commercial real estate. Tenants are out there, and bargains for purchase are as well.