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Wednesday, February 16, 2011

Listing Commercial Property

I had a meeting with a prospective client yesterday about listing their property.   There is perhaps 40% office vacancy in the area and his building needs a lot of work.  

This is not an uncommon scenario these days.   Many landlords are cash strapped and those dollars are precious.   I often hear that they will happily pay to fix it up once we have a lease with a tenant.    The common logic is that they hate to spend money to fix it up (new paint, carpet, etc) when they do not know what the tastes of a prospective tenant will be.   The fear is that the money will be wasted.

Although this is certainly logical and understandable, this logic will destroy your ability to lease or sell the property.     In the market today, there is a huge inventory of commercial property.   In thinking about the market today, it is useful to consider that there is perhaps a 10 year inventory of commercial property, meaning that at current rates of sales and leasing, it would take nearly 10 years to absorb all of the property on the market today.  (These rates do vary but this is not off base from actual rates from the last 2 years).  

Now, ask yourself, "Do I want to wait 10 years to sell or lease my property?"   I dont know anyone who can wait 10 years to lease or sell their property.   Logic would then tell you that if you want your property to move this year, you need to somehow position this property so that it is in the top 5% of these properties.   Lest you think that I made a math mistake, consider this.   If you were to aim for the top 10%, you would just barely be at the limit of the properties that are moving.   On that cusp, you may or may not be able to make things happen.

Back to the property from yesterday - with 40% vacancy, you have to fight to even get someone to come take a look.   When that person gets there and sees your property in disrepair with a promise that everything will be fixed if they rent and the property next door in pristine condition, which property do you think they will take?    To properly compete, you need to be as close to perfect as you can manage.   This means:
  • No mechanical issues -
    • HVAC all working properly and on ready to show;
    • plumbing all working properly with no leaks,
    • electrical outlets in good repair
    • all overhead lights working properly;
    • all utiltiies on and working.  
  • No issues with roofs.  
  • Windows and doors in good repair
  • All walls, floors and ceilings in good repair, clean and freshly painted.  
  • Carpet cleaned if not replaced
  • Clutter removed (old loose wires, old equipment, etc)
While some of this may seem obvious, believe me when I tell you that I have shown property with a flashlight with an internal temperature of 40 degrees and I have shown property with the carpet saturated with water and the ceiling tiles drenched.  None of these properties moved no matter how many promises of fixing it up to the prospective tenant's satisfaction.

If you would like an assessment of your property, let me know.   Have a great day all.

David

David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Parkway
Louisville, KY  40299

Monday, February 14, 2011

Valentine's Day

Last Friday and Saturday, I was at a Home Inspection conference for some Continuing Education.    It seems like there is always a surprise at those conferences.   This time was no exception, when I was told about Kentucky's Uniform Electronic Transactions Act which was passed in 2000.   

Of course, we have all been using e-mail for quite some time now and faxes are nearly obsolete.   But I was surprised that there has not been more reporting on the implications of this Act.   In many ways, this legislation makes transactions much easier.  At the same time, you might be surprised at how easily your e-mail or other electronic transaction can be considered a binding transaction.

Happy Valentines Day, all.  I hope you have a great evening with your sweeties and/or families.

David

David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate

Tuesday, February 8, 2011

KCREA Facts for the Day

Louisville Commercial Real Estate Market Facts for the day.

KCREA (Kentucky Commercial Real Estate Alliance) which has our Commercial Information Exchange (somewhat equivalent to the MLS of residential real estate) reports a total of 3158 listed properties today.   1496 are sale listings and 1662 are lease listings.   In the last 7 days, KCREA reported 8 sale transactions and 11 lease transactions.

For comparison, total KCREA listings very consistantly averaged 3000 for most of 2009 and 2010.  Hence total listings are up by a little more than 5%.    (Sales listing are up nearly 7% while Lease listing are up around 4%)    

The total number of transactions is very healthy relative to the last couple of years.  At the rates of last week, you would expect current inventory levels to last 166 weeks (about 3.2 years).   (Sales levels would indicate a turn over of 187 weeks (or 3.6 years) while Lease levels would indicate a turn over of 151 weeks (or 2.9 years)).  

All in all an interesting week.   We can hope this trend continues.  

If you need help with commercial real estate, please give me a call.  I would love to help.

Thanks, all.  Have a great day!

David

David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Pkwy
Louisville, KY  40299

Wednesday, February 2, 2011

Groundhog's Day 2011

I'm waiting to hear the verdict from Punxutawny Phil.   It seems ironic that we are having the storm of the century, a 2000 mile wide storm system covering 1/3 of the United States with blizzard conditions and it is Groundhog's Day.    If I were Punxutawny Phil, I doubt you could even get me out of my hole to check things out.  In fact, someone with a snow blower will probably have to clear the entrance for him to even be able to get out.   Given that there are white-out warnings from the blizzard, it is hard to imagine that their is any way that Phil could see anything at all, let alone his shadow.  Still, I am waiting to see...

Hoping for an early Spring.  Happy Groundhog's Day.

David