Month: July 2014

Long Island’s Commercial Real Estate Market: Bullish or Bearish?

What an interesting question.

If leasing rates are climbing, is that a good thing or a bad thing?

Well, it depends upon whether you are a Landlord with space to rent, or a tenant who is actively seeking to secure new space. Of course, we as a society, have been conditioned to believe rising rental rates are a “bullish” sign as it points towards improved (lower) vacancy rates and an economy that is improving. Remaining consistent with that point of view, clearly we at Premier Commercial Real Estate are very bullish at this point in time. We see continuing signs of economic improvement and positive absorption of previously vacant rental units. And we expect that trend to continue!

So, if you anticipate a need for new or additional space OR if you are nearing the expiration of your current lease, you might want to chat with a real estate professional to jump start the process before prices rise further. Even if your lease has a fair amount of remaining term, there may be considerable benefits in opening discussions with your current landlord “sooner rather than later”.

Alternatively, you may be a buyer who has been waiting for an opportune time to buy? Or an owner who has been thinking about selling but you have been reluctant to do so, in poor market conditions. Hmmm. Interesting….so let’s take a look at these two positions.

Increasingly, property values had bottomed out in the past few years, known as the “post 2008 era”. Of course, 2011 saw signs of improvement which has continued into 2012, 2013 and now, 2014. As confidence levels improved, buyers began to realize that the bottom of the market was reached and prices are on the rise. The combination of historically low Interest rates, which have remained at attractive and inviting levels AND limited inventory (buildings on the market being offered for sale), has created a “dynamic” which has placed upward pressure on pricing. We expect that trend to continue. So, if you are considering purchasing a building, we encourage you NOT to wait much longer as you may miss the boat. Either you may experience rising interest rates or higher prices. Either way, not a good idea to put off your plans much longer, in our view.

As a property owner who had been wanting to sell, but was unhappy with general market conditions, I suggest you consider the following rule of advice that was professed by a very experienced and successful owner/developer that I respect wholeheartedly…..…”sell when you can, not when you have to”. Today, demand for purchasing buildings exceeds supply. That, of course, is a terrific situation for sellers. Some brokers refer to that as a “Sellers Market”. Not necessarily so, in our view, but certainly a good situation and opportune time to “go to market”. Think about doing so….this is the time.

The Pendulum has swung……… you really want to wait until it swings back?

Buying and Selling Commercial Real Estate

Commercial real estate transactions are typically more complex than residential transactions. Usually, they involve large sums of money and increased liability for both parties. Unlike a residential transaction where the law provides basic consumer protection for the buyer, the law takes a neutral approach to its treatment of commercial transactions.

Courts expect that both parties to commercial real estate transactions are sophisticated enough to understand the contract terms. Therefore, they will hold the parties to the terms of any sales agreement – absent illegality or fraud. For these reasons and others, a buyer and seller of commercial real estate should both have professional help closing the deal.

Property Valuation

A large part of buying and selling commercial real estate is the process of determining a value for the property. By nature, real estate is a unique product that may have no exact sales comparison. For example, a buyer may be looking to purchase a movie theater in an area where there is no other theater that has sold to establish a market for the property.

Further, commercial property often has an income component that adds to the value of the property. Commercial property typically has a current and future income stream that must be factored in to the sales price. Buyers and sellers will hire a professional valuation expert to set a price for the property.

Sales Negotiation and Due Diligence

Buying and selling commercial real estate is typically subject to intense negotiation. Commercial buyers cannot fall back on consumer protection laws if an aspect of the deal ends up not being fair. Buyers are expected to conduct due diligence. In other words, they must investigate the transaction thoroughly before making a decision.

During the sales negotiation, the buyer has leeway to determine facts that impact the value of the property and attempt to gain concessions from the seller to offset any problems. This negotiation can ultimately impact your bottom line and whether the commercial asset makes or loses you money.

Assuming Liability

Another important aspect of buying and selling commercial real estate is the potential transfer of legal liability to the new owner. If commercial property is found to violate certain laws, it can be subject to government regulation. For example, once it is determined that a commercial property is the site of an environmental hazard, the current owner must clean it up – regardless of who created the hazard.

Environmental clean-up can cost more than the property itself is worth. The process of buying and selling commercial real estate requires various types of professional assessments to ensure that the new buyer is not taking on an eventual liability.

Loss of Liquidity

Commercial real estate transactions typically tie up large sums of liquid assets. In a down market, owners can have a hard time selling the property. Owners can have trouble with tenants and vacancy rates that affect their ability to make financing payments on the property.

If payments to the lender fall behind, commercial property is subject to foreclosure. Typically, commercial real estate purchases come with a lot of long-term risk. This risk must be realistically evaluated prior to making the purchase.

A Commercial Real Estate Lawyer Can Help

The law surrounding the purchase and sale of commercial reseal estate is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a lawyer who deals in commercial real estate.

Allstate to Cut Ribbon on New Hauppauge HQ

Elected officials and developers will join Allstate Insurance executives in cutting the ribbon Monday on the company’s new 88,000-square-foot regional headquarters in Hauppauge.

The new building at 898 Veterans Memorial Highway, a project of Colin Development and the property’s landlord Hauppauge Office Park Associates, will hold more than 450 Allstate employees currently spread out over four separate Hauppauge locations.

The $23-million project received property tax abatement of $1.2 million, sales tax benefits of $1.1 million and mortgage recording tax incentives worth $178,500 through the Town of Islip Industrial Development Agency.

Among those expected to attend the ribbon cutting ceremony next week are Suffolk County Executive Steve Bellone, Islip Supervisor Tom Croci, Colin Development President Fred Colin and its COO Ed Glackin.