In Ohio, Office Tenants In Stronger Position As Vacancy Rates Climb

This is not necessarily being repeated all over the United States, proving the adage that all real estate is local, local, local.

However, in much Ohio, particularly Central Ohio, office tenants are being offered significant opportunity for better renewal rates, being wooed to new office space, or even renegotiating existing leases. Depending on where you are, your economy and the amount of product available (leaseable space) dictates availability and per square foot rents.

When it comes to new space and early lease renewals, renters are in the driver's seat. Moreso in fringe areas of Columbus and suburbs where isolated office buildings that were to be the anchor for further development are, well . . . still isolated and often empty.

Unlike multifamily investment in the area, which is stable and lacking all the giveaways we used to see (free washers and dryers, free microwaves, free this free that for signing a lease), office owners are offering a number of incentives to get businesses to locate in their properties. This includes free rent for a certain number of months at the beginning of the term, low base rents and increases in amenities.

According to Schenk Company Inc., which represents tenants exclusively, in Central Ohio vacancy rates ranged from a low of 15 percent in southwest Central Ohio, to 15.1 percent in the central business district of Columbus, to highs of 23.9 percent in outlying (what I call fringe or edge) areas. Southeast Central Ohio had the highest office vacancy rate at 25.1 percent.

The key is knowing where you want to locate or expand your business. Pretty much everyone, with the exception of office operators who have high occupancy rates, is willing to be creative. Your experienced commercial/investment real estate agent can help you move through the minefield in tenant representation, and prevent office renters from making mistakes that could cost them later.

New Scam Hits Real Estate

Now the National Association of Realtors is the target. Well, actually, unwitting renters are the target, but legitimate Realtors might be dragged through the mud through no fault of their own on this one.

The National Association of Realtors' name is being used illegally as part of a property rental scam, according to the National Association of Realtors and law enforcement. In this scam, rental property is offered to consumers, who are led to believe that NAR is functioning as an intermediary to receive rental deposits from prospective tenants and, upon receipt of the deposit, to deliver the keys to the property to the tenant.

The tenant is instructed to send money via Western Union to NAR's purported agent, in the United Kingdom. If you have encountered this scam, be advised you may file a complaint with the Internet Crime Complaint Center, sponsored by the U.S. Federal Bureau of Investigation and the National White Collar Crime Center.

When this kind of stuff hits, it drives me crazy. For those who are considering real estate as an investment, are wholly invested in such, or who are tenants and who got burned one way or another, this kind of scam hurts everyone in the industry.

Definition For The Day

Here is a word that comes up from time to time, and buyers and sellers -- particularly investors involved in a 1031 tax-deferred exchange -- have wanted to better understand what it means.

The phrase is: "Subject To"

Here are two definitions:

a. The act of acquiring property with the existing financing and without formal assumption.

b. A term in a contract creating a condition which must be satisfied prior to the close of the transaction.

As an investor, be sure you are working with an experience agent who understands the intricacies of commercial/investment real estate.

My Brokerage Is Changing Its Name

Well, we are changing our name . . . slightly.

I am now part of Prudential Commercial Real Estate. Why,? you ask . . . Don't you know you are already with Prudential?

Of course I know! Its just that the letters "CRES" were part of the name until this week. It was confusing for many, as the acronym stood for "Commercial Real Estate Solutions." See the redundancy?

It may all seem silly and no big deal. Until you think about all the stuff that needs to be changed. Because it is a legal matter.

Anyway, I was out yesterday peeling vinyl off some signs at my listings. And I am in the process of making sure all of my online signatures, email, blogs and social network sites reflect the change as well. It all has to be done this week. Other silk screened signs may have white duct tape used to cover the letters no longer being used until new signs can be ordered. Hmmm....

For some it sounds simple. Its not. Thankfully its someone else's reponsibility to change over business cards, letterhead, envelopes, email addresses, office websites, remind agents to change their individual websites, marketing literature, bound property marketing packages, brochures, consumer guide's, investment discussion pieces, electronic presentations, etc., etc., etc.

Oh what fun . . .

Respectfully submitted,

Brent Greer
Prudential Commercial Real Estate

Financial Meltdown: The Villains Are On Your TV

As I sit here calmly . . . well, that is trying to be calm, I am choosing my words carefully.

Okay, here goes . . .

THIS IS WHAT I HAVE BEEN SAYING FOR MORE THAN A YEAR!!!!!

Whew! Now, with that out of my system, I point you toward a story that illustrates where a big chunk of the "housing crisis" eminated. It wasn't just financiers, or developers, or people in Congress who now say they have the answers, but were asleep at the switch when these problems bubbled up more than five years ago.

No, the problem -- is on your TV.

The idiotic "flip my house" shows, combined with the "get it for nothing" shows, competing with the "oh baby my house is worth a fortune" shows . . . THEY are a huge part of the culture today that doesn't understand why banks have tightened credit standards, or that their place doesn't appraise where they think it should. Viewers of these shows weren't investors -- they were gamblers. ARE gamblers. And they lost. Investors buy and hold and trade for long term wealth growth and to shelter taxes. Gamblers are looking for a fix for their cash habit. Something to put some extra bucks in their pockets, but didn't care about tax implications. Or that the false values that were being affixed to these properties would ultimately crumble because there was no foundation beneath them (like the construction metaphor?).

Read it. Understand it. Pass it on. Like I said early on, this is not news to me nor to regular CASH ON CASH readers. Old news. But for many, listen to hear any jaws dropping as folks who played this roulette wheel realize what they were a part of and how they drove the problem to become worse.

Now . . the writer takes a tongue-in-cheek viewpoint on this. He actually is being kind of silly with his story. But the guts of it are right on. These television shows encouraged people to drink the no-money-down koolaid, and many got hosed. How is that for blunt?

Okay, I'm off my soapbox now. . . .

Financial Humor

Okay, its a rough market out there. But here is a little financial humor to give you a chuckle, if even for just a moment.

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Definitions: The New Financial Jargon....

Bull Market -- A random market movement causing an investor to mistake himself for a financial genius.

Bear Market -- A six to 18 month period when the kids get no allowance, the wife gets no jewelry and the husband gets no "loving."

Value Investing -- The art of buying low and selling lower.

P/E Ratio -- The percentage of investors wetting theias the market keeps crashing.

Broker -- What my broker has made me.

Standard & Poor -- Your life in a nutshell.

Stock Analyst -- Idiot who just downgraded your stock.

Stock Split -- When your ex-wife and her lawyer split your assets equally between themselves.

Market Correction -- The day after you buy stocks.

Institutional Investor -- Past year investor who is now locked up in a nuthouse.

Profit -- An archaic word no longer in use.

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Rolling your eyes, or chuckling at this point?

Either way, I would respectfully disagree with the last point. Profits are out there. You need to know how to find them. And understand -- and respect -- the difference between greed . . . and smart, planned growth.

MF Rent Stability Depends On Region Of Country

There is a report out today that states apartment rents are plummeting around the nation. Plummeting is too strong a word, and it is NOT in every area of the United States. The culprit: lower wages and job losses.

A report earlier this month stated a similar trend, but I would respectfully suggest that the authors need to do a better job of writing their stories. You cannot highlight a half dozen cities, all with unique problems facing them (big boom times, tons of construction and now construction layoffsl; or financial centers with financial execs and other employees being laid off; etc.) and say it is indicative of the entire nation. The trend depends on where you are talking about.

For example, there are many major cities that are seeing rents stabilize, not drop. True, shares in the largest companies that own high-end apartment complexes have been dropping. But that trend is not indicative of every apartment owner. Once again, it depends on . . . Location, Location, Location.

So for those flippers out there who were hoping to earn some cash flow while waiting out the market, you are out of luck (and you CoC readers know how I feel about flipping -- it is gambling and the consequences are now being felt).

The softening rent trend, where it is happening, is generally good news for potential renters. Property owners who know what they are doing can do some simple things to more than even out for any vacancies suffered over the long run. Its easy. Keep rents slightly under the market and do everything you can to resist the urge to increase them as high as possible. What happens? Your renters stay longer, thus evening out the situation.

A Grubb & Ellis report looking at 2009, focused on multifamily opportunities in Orange County, Calif., noted two contradictory trends (that I have been writing about for almost a year now).

As I have written in many previous CoC posts, the pool of renters is increasing because foreclosures forced more homeowners into apartments. In addition, many renters who had planned to buy either cannot, or are waiting for even more bargains in hopes that home prices will decline farther. Conversely, also as I have written, there is an increase in supply as more single family homes and condominiums that aren't selling are leased to renters, putting pressure on traditional multifamily. Interestingly, but not unexpected, many young people fresh out of college are having trouble finding work. As a result, they are moving in with roommates or moving (moms and dads, here is where you gasp) back home, decreasing the pool of available renters.

The bottom line: Prospects for the apartment industry in the long term are incredibly strong, despite islands of dropping rents in a handful of markets around the nation. Good management of a complex that is in a relatively stable market will not see "plummeting" rents, but a stabilization.

UPDATE......... I should have mentioned what is happening in Central Ohio since this area represents the majority of my business transactions. Multifamily in Columbus remains generally strong (remember what I said about regional differences?) due to the large pool of college students who rent here (an estimated 100,000). In addition, while apartment vacancies are expected to uptick just a bit, asking rents are forecast to climb nearly 2 percent, with effective rents edging up some 1.7 percent, according to market forecasts. Says one prognosticator, the Columbus apartment market will end 2009 "with healthier fundamentals than earlier in the decade."

More food for thought.......