Commercial Industrial Market Conditions
Is trouble looming in paradise? Or are opportunities about to emerge and the sun about to shine? Well, that is a great question. One that depends upon where you believe the commercial real estate market is headed and which side of the “buyer/seller” fence you are on.
As professional brokers of Commercial Industrial real estate, we are fully knowledgeable of local market conditions…..in “real time”. We know what values properties are selling at. And we know what spaces are leasing for. This not only pertains to pricing. But to all associated business terms. And we are always happy to share that knowledge with investors and business owners alike.
And while we are often asked to “predict” where the market is headed, we typically avoid weighing in on that, since we are not clairvoyant. While we can accurately relay what has occurred and what can occur if the strong upward trajectory of the market continues, we cannot say with any level of confidence, that things will continue.
That said, we are in unusual times and we are beginning to see shifts in the wind. So, we felt it important to share our feelings….. and our concerns.
It should be no secret to anyone reading this that interest rates have remained flat, at historically low rates, for years. This is no longer the case, as interest rates on mortgages have nearly doubled in just the past few months. Interest rates are simply the “cost” of borrowing. And when the cost increases significantly, those additional costs must have an impact upon pricing.
Additionally, inflation has been almost non-existent for many years. Now we are experiencing a level of inflation that has not been seen in decades.
Further, for decades, the amount of new speculative construction for industrial real estate has been negligible. Almost non-existent. Today, in contrast, there is more than 10 million square feet of new speculative development either under construction or ready to begin, with all entitlements (permits, designs, site plan approvals, etc.) in hand.
All of these factors seem to be converging simultaneously and the predicted result is of concern to us. Over the past several years, and up until now, demand has far outweighed supply, causing property values and leasing rates to climb both rapidly and significantly. However, we are starting to see signs that we might be on the cusp of “change”.
While we can’t say for sure, we believe more and more properties are going to be coming onto the market and there will be downward pressure on values. In other words, we are feeling that we have reached a plateau of sorts……
A very wise large property owner mentioned years ago that it is best to “sell when you can, not when you have to”. That has been a prudent guide over the years and always looms in the back of our thoughts. Real Estate is cyclical and “timing” is of paramount importance, when it comes to property values.
So, the bottom line is “stay tuned”. It may soon be an optimal time to sell, while it may be the beginning of a period in which buying opportunities will soon emerge. So depending upon which side of the fence you are on, the advice is the same……strap your seat belt on and keep your eyes open