I recently was asked by a prospective client to analyze and list their property. I thought I would present this as sort of a case study. My analysis and recommendations follow:
Property and Market Analysis
In reviewing sales data, I was unable to find a single property like theirs which had sold in their area in the last 2 years. Given the change in the financial climate, I do not trust any comps older than that. I did find two units like theirs which were on the market for sale.
Checking out the leasing market for the property, there were several possible options in the area with some 32 other similar options within a mile of the property.
Looking at the market stats, our commercial real estate information exchange (KCREA) showed 29 Industrial Sales, 86 Industrial Leases, 30 Office Sales and 94 Office Leases for our entire area YTD. On the day of the analysis KCREA showed 219 Industrial Sales Listings, 337 Industrial Lease Listings, 254 Office Sales Listings and 771 Office Lease Listings. Looking at the amount of inventory and the rates of sales and leasing, it would take more than 64 months to sell all of the sales inventory and it would take more than 49 months lease all of the lease inventory.
Property Recommendation
With this amount of inventory and competition, it is critical to position property in the top 5% or 10% of the properties on the market in price and condition in order to move it.
I advised the prospective client to price the property below the offering price of the two similar properties in the area, which had not sold AND to be aggressive in pricing, terms and property condition in order to lease it.
Client Response
In spite of the analysis, the owners insisted on a listing price approximately $70,000 more than I recommended (and to put this in perspective - about 33% above the recommended price) And while they were happy enough with the suggested lease rate, they insisted on not less than a 3 year lease and property to be taken "as-is." Also, they insisted that any commission I earned in leasing the property should be refunded to them in the event someone decided to buy the property.
Result
When all was said and done, I passed on taking the listing. In my opinion, the property would not sell at that price. Accordingly from my perspective, the most I could reasonably expect to make would be a commission on a lease, which in this case would have been a small amount anyway. Then on top of that, the owner wanted me to rebate that commission if I managed to sell it after all.
There have been times earlier in my career when I would take a listing and list it at a higher than recommended price thinking that I would satisfy the client and we could adjust it later. My experience has been that this doesn't help anybody. If the property is priced too high, you often cannot even get anyone to look at it. And while I certainly want my clients to be happy, any project I take on has to make sense for me from a business perspective. The bottom line is that if there is no way for me to earn any money off of the deal, it isn't something that I can afford to waste time on.
Well, with that out of the way, I guess I want you to know that I am still taking listings. If you have property that you would like me to take a look at, let me know. I specialize in Commercial Real Estate and am a licensed real estate broker in Kentucky and Indiana. 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
No comments:
Post a Comment