As we begin our climb out of the recession there are many opportunities in commercial real estate, but none greater than that for the owner occupant…where the proprietor of the business, owns the real estate as well. There is no better time to make the jump from leasing to owning your real estate!
Why? First, prices have been reset. Over the past 24 months, we have seen prices fall on real estate and in some cases as much as 35%. This is primarily due to the fact that values became so inflated during the boom in the mid-2000’s they are now retracting to a more normal level. So you are ‘buying in’ at a great time.
Second, if you’re looking to build from the ground up or fit-up an existing building, construction costs are at record lows due to the lack of work. Contractors have slashed their margins just to keep crews working which translates into a great time to build or expand! I work with a client who builds the exact same building at all locations and in the past two years, we’ve seen the bid prices drop over 40%!
Finally, and probably most critical is the financing. In the mist of frozen credit markets, owner occupants are the ones who can get the financing needed to execute deals. There are many reasons banks still have confidence in owner occupants. They include: Banks are anxious to build relationships with these businesses as they can sell them other services that are profitable to the bank; underwriting and monitoring is easier on owner occupied real estate; and typically owner occupants have more assets in case of default. Not only are the banks eager to work with owner occupants, they are receiving the most aggressive financing out there and in some cases as much as 90% LTV! There are many other programs such as SBA loans and other stimulus money that is directed to the small business owner. On top of all of this, interest rates are at historic lows.
In summary, prices have been reset, there are many great properties, building costs have never been cheaper, financing is available, and rates are the lowest they’ve ever been. If you are a business owner and have been on the fence considering whether or not to purchase land or a building for your business, now is the time to act!