With the New Year, it’s that time again to throw out the old and bring in the new.
When it comes to commercial real estate, I’m ready for it.
Property owners and brokers are, frankly, tired of the old. The old ways are to keep reducing prices and taking cuts. We’ve been at it for years now.
So, what’s my New Year Resolution?
Throw away the “reduced” signs. It’s dawned on me that there are several reasons to resist the temptation of this little gimmick.
No 1. Does anybody really think that prices haven’t been reduced already?
Most of my commercial real estate owners have taken huge discounts in value over the last several years.
We’ve cut, we’ve sliced and we’ve cut some more.
How much more can we reduce?
We’ve seen price cuts of 50 to 60 percent on some types of real estate. Land values have been gutted. Some assets, such as cash flowing investments, have remained strong, but, overall the market has been declining since 2008.
Most economists will tell you that you don’t know when you hit the bottom of the market, until you’re on the way back up. I am seeing signs of increasing values. It appears to me that we’ve hit the bottom and are headed up. Or, at least the decline in values has stopped. Land values have sharply increased just in the last six months. Signs of life are encouraging.
No. 2. “Reduction” signs bring out the vultures, those guys who aren’t really serious about buying unless they can “stick it to” somebody.
Those kinds of buyers aren’t fun to deal with and nobody feels good about the transaction afterwards. It seems in this market, that no matter what the property is priced at, offers are always much lower.
The “vulture” mentality is still alive and strong, but someday soon, we will have a seller’s market. Then, the tide will turn and the vultures will no longer hold the keys to the marketplace.
And finally, I’m tired of a down market. I may be dreaming, but I think it’s time for the market to improve.
It might not be because the economists are predicting it...which many aren’t.
It may be just because my clients are tired of taking price reductions. It’s time to start thinking positive. We might even increase prices this next year for the first time in a long while.
Brian Patton, CCIM is a commercial real estate expert and broker. His book, “Mailbox Moola, How Real Estate Cash Cows Put Money in Your Mailbox,” can be found on Amazon.com. He can be reached at 770-634-4848, or via his website: www.capitallistings.com.