Commercial Market Update

by Coldwell Banker Evergreen Olympic Realty, Inc. on May 31, 2012

Opportunities Exist For Buyers and Sellers

We are fond of saying “there is a buyer for every property and a property for every buyer.” In a down-trending market, it is sometimes hard to stick to this belief. As we see sellers and landlords mark down prices on properties and still see little activity, it stirs the doubt about tried and true market dynamics.

Our faith is always reassured when we see product move. This only happens when price reaches the point where supply and demand meet.   In our market today, that intersection has prices on most product types at levels not seen in a decade. 

It is a reflection of the large supply of properties still available.  With the consolidation of state offices and the overbuilding that occurred in the middle part of the last decade, we simply have an unprecedented amount of pressure from the supply side. 

This is presenting opportunity for buyers and tenants alike.  Today, there is a great deal more interest in leasing than we saw a year ago. Tenants have realized the opportunity to create some healthy savings on occupancy costs. Buyers see that they can own a property for the same cost that they had been paying in rent. And the buyers who dreamed of building are finding they can purchase existing space at a fraction of the cost of new construction.

Even with the increased market activity, our inventory continues to creep up. Consolidation continues, banks are dealing with foreclosures, and new business creation is still tepid. This means the higher levels of supply will persist through the next couple of years.

Given this reality, sellers and landlords must take a serious look at where prices are today. From a seller’s perspective, it might be the difference between selling today or waiting to sell until the market inevitably rises.  If the goal is to achieve an absolute price rather than just a sale today the question becomes how long before the market rises to the desired selling price. In most cases, we find the holding period will be longer than most owners are expecting. On the other hand, if selling over the next 12-24 months is desired it is probably better to sell today given that the market is still correcting down.

From a landlord perspective it is far better economically to stay out ahead of the curve than to chase behind it. We certainly understand the challenges faced by many landlords. There are a great many ways to structure deals that lead to success in today’s market. The trick is to evaluate the market carefully and honestly – and in some cases redefine the personal definition of success. Too many are holding on to yesterday’s reality, but facing today’s realities is the difference between occupied and vacant space.

Whether landlord or sellers, those who are willing to price to market are finding buyer and tenant interest out there. The question to ask is, “am I priced to market?”

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