Residential Real Estate

A client just called to discuss his proposal to his current landlord about reducing his current base rent to market value for his office.  Unfortunately, according to the client, the Property Manager (PM) is telling him and the Landlord (Bank -- of course) that the Las Vegas Office Market is going to turn and rents will be increasing in the next year.  Thus, a higher than market value should be agreeable.

Huh?  What?  I swear.  That's what my client told me that the PM told the Bank.

As I sit here looking at the Las Vegas Commercial, Investment Real Estate scene, there are far and few transactions going on -- lease wise -- to back up that statement.  I do NOT see (published ) accounts of office space being leased up at higher than market.  The office vacancy in Las Vegas is still around 24% to 25%.  And the sub-leased space that is currently vacant only adds to the vacancy.  (Space that is still being paid for despite the office is no longer being occupied.)

Where are these PM's and Bank's getting this idea that this vacancy problem and lease rates turning to higher prices in the next year get this notion?  That is a long way away.  And, leased (partially leased) buildings are being sold at 1/4 to 1/3 less than asking.

Still, most of my clients are sitting on their money.  They are going to feed -- when they get hungry -- only on property that has seriously dropped in price.  And with the Fannie Mae and Freddie Mac scenarios looming, prices on homes will drop, and that will reflect upon commercial property and especially investment property as we move on into the future.

Acquiring property in Las Vegas is a wait and see game.  Banks made the mistake of believing RE agents in the past and making outrageous loans on property with the self assurance that prices will NOT drop are the same Banks that are still listening to these very same RE agents telling them "lease rates" will be getting better -- next year.

Now, I am NOT a genius.  But as Colin Coherd says: "If it doesn't sound right, say it out loud."

And unfortunately, for me, since I am no longer affiliated with a national brand, my opinion gets smothered by the brands insistence that they are correct.  I may be a small one man shop.  But I will NOT mislead a bank who is desperate to re-coup the money that was foolishly invested in bad loans.

And, since these very same banks who made the foolish loans, it's your turn to take the loss.

For Information about Las Vegas Commercial Investment Property, contact David Howes at: david@davidhowes.net