BUYING COMMERCIAL REAL ESTATE?…There’s No Better Time Than The Present!

January 3, 2012 

By: Martin F. Alfaro, Associate VP/Sales & Leasing

Many clients ask me if I think we have reached rock bottom in commercial real estate and if they should wait to purchase a property.

My initial response is that my crystal ball broke back in the early 2000’s when prices reached an all-time high, capitalization rates got as low as 4%, and properties were selling by the dozens before hitting the market. We thought we had reached the zenith in pricing by 2004 only to see prices push upward towards the stratosphere in 2005 to mid-2006. Then, we all thought this escalation would continue for many years to come only to realize all good things must come to an end. Now, fast forward to 2011/2012 and prices have declined in all sectors of commercial real estate with geography being the most notable factor in whether a property sells or not. 

When I sit down with clients it is important to first discuss the exit strategy in future years so we can plan accordingly. For my owner/user clients I like to analyze their growth and direction for the upcoming years plus review the options of owning vs. leasing. For investors, we find the comfort level with price, property type (industrial, retail, office), and stability of tenants on any given project. In either scenario there is a multitude of options in today’s market with foreclosure, short, REO and/or conventional sales. 

In reality, once we consider the investment options presented. Interest rates are at an all-time low, capitalization rates are pushing up towards 8% (higher on select properties), plus commercial real estate prices are reaching a more palatable arena I suggest to my clients this market lends itself to pursue those goals and ambitions of purchasing the property that suits their portfolio the best.  

Recently I checked on the availability of my crystal ball but have been informed it could take years before it is restored; however, one thing is certain when buying commercial real estate…there’s no better time than the present!