Archive for June 2011

"Purchasing Real Estate now is like catching a falling knife!"

Wednesday, June 29, 2011 –

Just this AM, a long time client of mine said to me, "Purchasing Real Estate now is like catching a falling knife!"
 
I had to repeat it back to him because, at first, I thought he was joking.  And, even though he said it in a joking manner, he was and is dead serious and absolutely correct.

This client was able -- through my help -- to sell a majority of his portfolio of properties in 2006 and the last in 2007.  When we met, I reminded him that he made out like a bandit looking back with 20/20 vision.  He laughed and said, it was all just the right time for him.

And, even though, he still maintains a couple of properties, every once in a while, I will call to test his appetite for acquiring real estate.  And, this morning, after reviewing a few potential properties, he said the above and decided to wait some more.

And, not wanting to catch the falling knife is great symbolism.  because in it, it is implied you will be hurt.  Cut even more badly than you would want.  And, even if you were able to catch it clean, your chances are still great that you will be cut in some manner.

Are there deals?  Of, course, Yes!  But, for most of my clients waiting is their option and they do NOT fear time.  Unfortunately, I keep trying to tell them to NOT wait.  Why wait for the property that you can acquire for: $1.6 Million to see if $1.55 Million would be more attractive?

And, I am seeing this on a lot of properties where companies and individuals are pressing the envelop to get the cheapest price available.

And it holds true for even the clients I am working with.  One has the mantra it's going to be his price or the highway.

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

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Rentable v. Usable: Load Factor

Monday, June 13, 2011 –

Most office buildings have a load factor. This load factor is a percentage that describes the difference between the rentable and useable square footages for the building. The usable square footage of a building is all the square footage behind the front doors of the tenant’s suite; the space that is exclusive to them. The rentable square footage is the usable square footage plus the common areas. The common areas include the hallways, lobbies, elevators, stairwells and restrooms of the building. These areas are not exclusive to any one tenant, but are for the use all the tenants and their guests.

Let’s say the gross square footage of an office building is 100,000 square feet. The gross square footage of the building is everything contained within the exterior walls. Let’s say that the total square footage of the common areas of the building is 15,000 square feet. This leaves 85,000 sq.ft. of usable space (i.e. suites).

To calculate the load factor we take the total square footage of the common areas, (15,000 sq.ft.) and divide it by the gross square footage of the building, (100,000 sq.ft.). The formula looks like this:

15,000/100,000 = .15. Therefore, the load factor of the building is 15%.

Let’s see how the load factor relates to leasing space within the building. Let’s say that a tenant plans on leasing a suite with 1,200 square feet of usable space. Knowing that the load factor of the building is 15%, the tenant could then calculate the rentable square footage of the suite (1,200 + 15% = 1,380 sq.ft.). So if the monthly rent for the suite is $2.00 per square foot, the tenant’s total monthly rent would be $2,760.00:

(1,380 rentable sq.ft. x $2.00 per sq.ft.= $2,760.00).

The rentable square footage is always higher than the usable square footage because it includes both the tenant’s suite and their percentage of the common areas.

When shopping for space, it’s important for tenants to understand and compare the load factors of the buildings they may be interested in. Higher load factors mean that more of a tenant’s monthly rent will be dedicated to common areas and less to the suite they occupy. That being said, buildings with higher load factors often have amenities, such as spacious lobbies or atriums, which many tenants may find appealing.

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Las Vegas Home Prices to Continue to Fall?

Wednesday, June 1, 2011 –

A little disturbing news this AM in the Las Vegas Review Journal.  This article paints a dismal picture that home values/prices will continue to decline even at the slower rate of 4% to 5% per year.

My home is currently worth less than what I had paid for it and I am -- for the first time -- seeing my home value now lower than what I owe.

How does this translate to commercial real estate, you may be asking?  Since home prices have slide (crashed?) commercial real estate has fallen just as much or more right behind it.

And, as I drive around and view properties my clients (could be) are interested in, I am noticing more and more vacancies.  Tenants are now numb to the after effects of walking away from their leases or mortgages.

http://www.lvrj.com/business/las-vegas-home-prices-continue-to-fall-122890524.html

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

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