The commercial real estate market is not doing so well but for businesses, the LTC below 65% has created a huge impact. Believe it or not, this has created an opportunity for renters to keep the building or office unit to themselves when the inevitable downturn hits.
The activity in the market is on the up and up and so far, shows no sign of settling down. People are now receiving multiple offers because the inventory is very low. The commercial offices and buildings that once stayed on the market for too long are now being picked left and right. For tenants and buyers, this is the time to bid aggressively and get their hands on this opportunity before it is lost.
How Can a Company Grow in Such a Competitive Market?
The current cost of new construction is between $60 and $90/sq ft. The problem that businesses are facing is that they are no longer able to find an office in a suitable location. If they acquire a building with lesser quality at a construction cost of $20/sq ft, they can spend $20 more on per foot for renovation. This definitely falls under saving. However, these deals are extremely scarce in the market.
How Are New Construction Projects Doing in the Market?
As mentioned earlier, the cost of new construction might seem astronomical to small business, while big businesses are looking to create equity or save on rent. There are a few projects underway and companies should be on watch to sweep the place up before someone else gets to it. The cost might be high but they will save on taxes and utilities.
According to National Association of Realtors, the second quarter of 2018 witnessed a slowdown in investment sales in the market. Sales volume rose by only 0.5 percent due to low inventory and prices rose by 5.1%. The average transaction value was $1.79 million. Offices had the second highest vacancy rates at 12.4%.
The good news about new construction is that these offices are created keeping in mind the green movement. They are energy efficient, have more drive-ins and the ceilings are at least 32 foot tall. This reduces carbon footprint by using one place for the entire inventory. The extra space comes quite in handy especially in warehouses.
When companies are searching for an office, they should do their homework keeping in mind their product’s and service’s requirements. An investment as huge as this is made once in 10 to 20 years, so at the backend, everything should be cleared.
While bidding, businesses need to be aggressive with their offer but not put demands on the table. Since there’s already such fierce competition in the market, it will only take a second for another buyer to swoop in on the deal.
The strategy behind buying more space for the business, whether it is in office or warehouse form, attention should be paid to the bigger picture. Up till now, the market has been the same but there’s no prediction on what turn it will take next year.